Australia's iron ore miners are creating plenty of energy today after the commodity's price continued to surge overnight. According to figures provided by the Metal Bulletin, the iron ore price rallied another 1.7% to US$61.40 a tonne, up a remarkable 31% since it bottomed out at US$46.70 a tonne early last month.
With BHP Billiton Limited (ASX: BHP) and Brazil's Vale both indicating that they could ease their expected levels of supply over the coming years, investors are increasingly confident that the recent rally can be sustained, and even extended upon.
That confidence has certainly been reflected in the share price movements of some of Australia's higher cost producers, including Fortescue Metals Group Limited (ASX: FMG), BC Iron Limited (ASX: BCI) and Arrium Limited (ASX: ARI), which are trading 5.4%, 7.9% and 8.3% higher today, respectively.
BHP Billiton and Rio Tinto Limited (ASX: RIO) are also jumping as a result with the pair up 1.6% and 0.5% each. Indeed, the rally could be sustained in the near term, but investors need to be aware of the high level of risk still facing the sector.
As has been reported by the Fairfax press, ANZ Bank and UBS are both expecting the commodity's price to retreat considerably by the end of the year, with the latter suggesting the price will return to just US$45 a tonne.
Should that scenario play out, investors who are exposed to the sector could suffer enormous losses as their shares return to the doldrums. Forget iron ore. Here's how you can play the Australian LNG revolution
