Spot iron ore, as it has done for the past month, has continued to surge higher.
According to Metal Bulletin’s iron ore index (MBIOI-62) spot prices rose an additional $US1.62, or 2.64%, to $US63.02 overnight, taking the price to the highest level seen since February 24 this year.
While year-to-date the spot price is still down 11.5%, in what makes for interesting timing before tonight’s federal budget, it is now approaching the $US68 a tonne level (including freight costs) forecast in the 2014-15 MYEFO following a breakneck 34% rally over the past four weeks.
Going further, based on the assumption that the Australian Dollar would average around US84c over the forward estimates, the current spot price in Australian Dollar terms – $A80 – is only 1% below the level assumed in MYEFO.
While it’s almost a certainty that iron ore price forecasts will be revised down in tonight’s budget, perhaps the scale of the downgrade – particularly in light of the recent bounce in spot prices – will be far less than the $US35 a tonne level floated by treasurer Joe Hockey only a few short week’s ago.