Atlas Iron Limited (ASX: AGO) was the top performing stock from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) this morning following a strong night for iron ore prices.
After having slipped to its lowest price since at least May 2008 earlier in the week, iron ore, which is a key ingredient required to produce steel, rose 1.9% to be trading at US$55.56 a tonne, according to the Metal Bulletin. Although it is still trading almost 60% below its price in January 2014, the overnight bounce will certainly provide an element of relief for investors in the embattled sector.
The rebound came after Andrew Forrest, chairman of Fortescue Metals Group Limited (ASX: FMG), called for a production cap to be set in place to force the commodity's price higher. As reported by the ABC, Forrest would be "absolutely happy" to cap Fortescue's production, together with BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Brazil's Vale, which represent the world's four largest iron ore miners.
According to the ABC, Forrest said: "All of us should cap our production now and we'll find the iron ore price will go straight back up to $70, $80, $90." He also referred to the tax revenues which could be generated if such a change were set in place, suggesting that more schools, hospitals, roads and universities could be built as a result.
Indeed, such a move may benefit each of Australia's miners. While an enormous weight would be lifted from the shoulders of smaller miners such as Atlas Iron and BC Iron Limited (ASX: BCI), higher iron ore prices would also benefit BHP and Rio Tinto, whose earnings have come under significant pressure over the last 12 months.
Atlas Iron, which has risen more than 10%, isn't the only mining stock bouncing on the news. Fortescue's shares have risen 1.7%, BC Iron is up 0.5% and Mount Gibson Iron Limited (ASX: FMG) has jumped 0.9%.
