The Australian newspaper is reporting that even the newly appointed head of BHP Billiton Limited's (ASX: BHP) iron ore and coal division thinks the recent iron ore price rebound is unsustainable.
Iron ore prices surged above US$70 per tonne overnight on optimism over renewed demand for the red metal from China as its property market ticks up and steel manufacturers enjoy higher prices on a construction rebound.
However, Mike Henry, the new head of BHP's iron ore division reportedly told a business lunch on the subject of iron ore prices: "I think we will see this for a few months, but then things will come back".
When the head of BHP Billiton's iron ore division publicly states his belief that recent price rises may not be sustainable, it's a fair assumption that prices might finish the year below the US$70 per tonne level they hit overnight.
That means the share prices of iron ore leveraged miners like Rio Tinto Limited (ASX: RIO) and the heavily indebted Fortescue Metals Group Limited (ASX: FMG) may also finish the year significantly below the levels they are at today.
As price taking businesses iron ore miners have little control over the revenues received for their iron ore product that is the effective fuel required to feed China's steel mills.
As China exits a once-in-a-generation construction 'super-cycle' it's hard to avoid the conclusion that the long-term trend for iron ore prices is down. Especially as more supply comes onto the market and the BHP Billiton boss himself concedes that "things might come back".
Smart investors then might want to avoid the commodities space and consider some of the red-hot opportunities identified below…
