The iron ore price defied the market's expectations during its latest session with the Metal Bulletin reporting that the commodity rose 3.5% to US$59.96 per tonne.
Although the iron ore price still fell 2.2% during the week, and remains more than 55% shy of its levels around US$135 at the beginning of 2014, it has managed to defy analysts' expectations in recent weeks, retaining most of the gains it recognised during a strong rally in April sparked by suggestions of a cutback in supply from the world's biggest producers.
Indeed, BHP Billiton Limited (ASX: BHP) and Brazil's Vale both indicated they would cut back on their expansion plans, which saw the commodity surge more than 30% in roughly five weeks. It bounced from a low beneath US$47 a tonne, hitting a high at roughly US$63.
But while some analysts were quick to suggest the commodity may have reached a floor, others such as Goldman Sachs, UBS and ANZ all recognised the underlying issues facing the market.
Regardless of whether or not BHP and Vale cut back their production, others in the market would simply take their place, taking advantage of the higher prices in the process. At the same time, demand from countries such as China may not rise significantly enough to justify a higher price.
Although miners such as Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), BC Iron Limited (ASX: BCI) and BHP Billiton all benefited from the rally today, investors shouldn't get too comfortable with iron ore sitting where it is right now.
The fact is, the underlying fundamentals are still weak and it is difficult to see the price remaining at these levels for too long, and when it falls, you can expect heavy falls from those stocks.
A much safer bet for your money