Here’s why the iron ore sector is climbing today

Australia’s iron ore miners are breathing a sigh of relief this morning after the red metal enjoyed its biggest one-day rise since March overnight. Although there are still growing signs of weakness in the Chinese economy, firmer spot steel prices from China helped the commodity to rise 3.9% to be trading at US$85.20 a tonne.

While BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) both benefited from the rise, with their shares up 0.8% and 1.2% respectively, it was the smaller or higher-cost miners who showed the strongest reaction. Fortescue Metals Group Limited (ASX: FMG), for instance has risen 2.9%, while Atlas Iron Limited (ASX: AGO) and BC Iron Limited (ASX: BCI) have both jumped 3.5% and 4.4%.

Those strong surges suggest that investors might be buying up in the hope of a recovery. With the commodity down 37% since the beginning of the year, many in the market believe that the sell-off has been overdone and that the stocks are now presenting as excellent value. Fortescue, for instance, is trading 34% below its 52-week high, while Atlas Iron and BC Iron are 52% and 61% off their highs, respectively.

While buying iron ore miners could be a way to make some quick profits (provided that the iron ore price does continue to strengthen), I am not so bullish on the commodity for the long term. In fact, I’d be more inclined to agree with the numerous analysts who are suggesting it will fall to just US$75 a tonne in the coming months. The fact is, while Chinese growth rates are slowing and global supplies are rising, there really is only one way the commodity can go over time.

3 "under the radar" resources tips for your portfolio

While I wouldn't be touching the iron ore miners right now, oil, copper, and gold continue to be in high-demand -- and their popularity doesn't look to be slowing. We've uncovered three companies poised to benefit from the rising prices of these commodities. Click here now to get our brand-new report -- "3 'Under-the-Radar' Resources Companies That Could Win Big" -- FREE!

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.