What: The iron ore price gained 2.3% overnight to US$94.60 per tonne thanks to buying by Chinese steel mills according to the Australian Financial Review. For investors who believe the long-term average price for iron ore will settle at or above current levels, now could be a good time to take a close look at the sector.
So what: After sinking throughout May and reaching a 20-month low last week, it appears that at least temporarily the iron ore price may have found a level of support. The steadying has seen investors wade back in to buy Fortescue Metals Group Limited (ASX: FMG) and other beaten down iron ore miners such as Atlas Iron Limited (ASX: AGO) and BC Iron Limited (ASX: BCI) with all three stocks trading higher this week.
Now what: While even Andrew Forrest has not ruled out a near-term fall as low at US$80 per tonne, some industry watchers are suggesting iron ore has been oversold and that we are entering a period of consolidation. This outcome would bode well for iron ore producers and could suggest that with these three stocks down between 20% and 40% year-to-date now could be an opportune time for iron ore and China bulls to buy.
