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Iron Ore Prices Rally As Market Eyes Stronger Demand For Steel

By
Team Kalkine
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January 8, 2019
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Market statistics tracks another impressive rally in iron ore spot prices on Monday. Its spot price has reached above $73.00 per tonne, massively up from its November meltdown.
The positive market trend in iron ore prices seems to be driven by the speculation for higher steel demand in China. The analysts believe that the overall gains in iron ore price underline the favorable outlook for escalating steel demand in the key emerging market, especially China.

‘Let’s patch up attitude’ of the United States and China have further given more hopes to the market participants. On Monday, US-China has come forward to settle all the ongoing trade tensions between the world’s two leading economies. The officials of both the countries have completed the first round of two-days talks held in Beijing and are expected to release the results on Wednesday. If the discussion meets the breakthrough, it could result in the lifting of several tariffs imposed by the US including the taxes charged on China’s steel imports from the US.
Moreover, China’s development regulatory body has recently given a green card to billions-yuan urban rail projects on the back of which China’s steel appetite is likely to go straight up. And as we all know there is a direct relationship between the iron ore and steel-making.
For better understanding, we can say approximately 98% of the mined iron ore is used to make steel. Iron Ores are in the form of rocks and minerals from which pig iron is produced which is then sent to a basic oxygen furnace to turn it into steel. This is the reason why the rising steel demand forecast has resulted in the positive price movement over the iron ore spots market.
In February 2018, iron ore prices have been sitting on the top at around $79 a tonne and beyond. But the highly-fluctuating trends have been seen over the iron ore prices traveling from its peaks to lower ends of $63 a tonne in July 2018 and then making a rebound to $77 per tonne in October 2018 followed by a steep fall in November.
Since the start of 2019, the major grades of iron ore have shown strong uptrends in prices. As a result, the global iron ore makers have witnessed the bullish market sentiments on the stock exchange.
Taking it to the key metals and mining players listed on the Australian Securities Exchange, we can see the upside stock price movement across-the-board. On 8 January 2019, the share price of BHP Group Limited (ASX: BHP) edged up 0.116% to last trade at $34.430. BHP closed at a PE multiple of 36.520 x with a market capitalization of $101.31 billion. Further, Rio Tinto Limited’s stock (ASX: RIO) surged 0.507% to close at $79.300, Fortescue Metals Group Ltd (ASX: FMG) has witnessed a positive daily price change of 2.027% to settle at $4.530 and Mount Gibson Iron Limited (ASX: MGX) was up 3.738% to last close at $0.555.