In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) remains on course to end the week on a high. At the time of writing, the benchmark index is up 0.75% to 7,230.6 points.
A key driver of this has been gains by ASX 200 iron ore shares.
For example, here is a summary of how they are performing today:
- The BHP Group Ltd (ASX: BHP) share price is up 2.5% to $46.72
- The Champion Iron Ltd (ASX: CIA) share price is up 7% to $7.78
- The Fortescue Metals Group Limited (ASX: FMG) share price is up 4% to $21.43
- The Rio Tinto Limited (ASX: RIO) share price is up 2.5% to $115.78
What’s driving ASX 200 iron ore shares higher?
As you might have guessed, Australia’s leading iron ore shares are gaining today because of a rise in the price of the steel-making ingredient.
According to CommSec, the benchmark 62% fines iron ore price rose by US$6.86 or 5.1% overnight to US$142.20 a tonne.
This is materially higher than the cash costs per tonne of these miners, which means they are likely to be generating significant free cash flow right now. This bodes well for their earnings and ultimately their dividends.
Why is the iron ore price rising?
The catalyst for the rise in the iron ore price this week has been news that China is finally coming out of lockdowns. This has sparked hopes that demand for the metal will increase as China attempts to boost its struggling economy.
Though, it is worth noting that not everyone is positive on the metal. As we mentioned here earlier this week, the commodities team at Commonwealth Bank of Australia (ASX: CBA) is forecasting a sharp pullback in prices in the coming months.