Iron ore prices have risen over 4 per cent overnight after BHP Billiton (ASX:BHP) announced a slip in production guidance. Iron ore for immediate delivery to the port of Tianjin, China was trading at US$52.90 per tonne while the Metal Bulletin price for delivery in the port of Qingdao rose 5.9 per cent to US$54.04. The commodity price for the steel-making ingredient had its largest gain in over two years. The Metals and Mining index on the ASX is up 1.36 per cent around noon on Thursday. Many analysts and government officials had previously projected prices to fall to US$35 per tonne, putting a major squeeze on Australian miners. Standard and Poor’s recently downgraded the debt rating on Fortescue Metals (ASX:FMG) amid concerns that the miner would struggle to make a profit at price point of US$50 or less per tonne.
The jump in iron prices has largely been contributed to an announcement by mining giant BHP. The world’s largest mining company decided to forego a Port Hedland harbour debottlenecking project, which will slow its targeted capacity to 290m tonnes. The company has still raised its guidance from 225m to 230m tonnes for the financial year. Other companies such as Atlas Iron (ASX:AGO) and Arrium (ASX:ARI) said they would also be limiting some iron ore projects in the near future. Rio Tinto (ASX:RIO) and Vale (BVMF:VALE5), the world’s second and third largest miners, both failed to meet production expectations in activity reports released recently. BHP is trading higher after the positive news, up 60c, or 1.98 per cent, at $30.87 per share around 12:44pm on Thursday. RIO has also made gains, up 85c, or 1.54 per cent, at $56.05 per share.
Author: Imran Valibhoy
Apr 23, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.