Iron ore jumps back above US$60 a tonne

Iron ore rose 3.5% overnight to US$60.70 a tonne, according to Metal Bulletin, which could see the junior iron ore miners’ share prices fly in early trading.

It’s the highest level since May 3, and analysts have pointed to stronger Chinese steel prices. That is due to production curbs at some steel mills.

iron ore price YTD Jul 2016

Source: Metal Bulletin


As the Steel index puts it, “Steel markets in China continued to firm as the authorities conduct environmental checks, resulting in output cuts at some producers.  Spot rebar prices in Shanghai rose by RMB40/t, while those in Beijing gained RMB10/t. Tangshan billet prices gained RMB30/t.”

More gains could be ahead for the spot iron ore price after commodity futures rose another 3.3%.

That should be good news for Fortescue Metals Group Limited (ASX: FMG), BC Iron Limited (ASX: BCI), Mount Gibson Iron Limited (ASX: MGX), Grange Resources Limited (ASX: GRR) and Atlas Iron Limited (ASX: AGO).

Other iron ore companies Gindalbie Metals Ltd (ASX: GBG) and Mineral Resources Limited (ASX: MIN) should also see early gains in their share prices.

Interestingly, BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) saw their share price virtually unchanged overnight on the London Stock Exchange. That is likely due to their market-leading low production costs compared to the smaller miners.

Fortescue’s share price is up 147% so far this year and closed at $4.62 yesterday. BC Iron and Mount Gibson have seen their share prices rally 52% and 66% respectively in 2016. Atlas Iron’s share price, in contrast, is down 33%, but the miner has more debt and relatively higher production costs than BC Iron and Mount Gibson.

Mount Gibson is actually trading below its cash balance – with a market cap of $327 million and cash and investments worth $400 million at the end of June.

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