Bulk Buys: Iron ore hits astonishing $US230/t, upside remains

Issued at 2021-05-12

Iron ore hit a heady $US230/t yesterday and, in the process, blew every expert forecast out of the water.

China loves a whinge, but right now they need our iron ore to feed their ravenous construction and manufacturing sectors.

Importantly, domestic steel prices and mills’ profit margins are still on a rising trend, Roskill says.

One of the most significant aspects of #ironore's price rally is that high-grade ore is outperforming lower-grade ore - a very encouraging indicator for prices, as it signals good profitability within #China’s #steel sector and therefore ongoing demand strength. #mining #metals

Meanwhile, steel production in the rest of the world is recovering after posting a near 8% year-on-year decline in 2020.

Iron ore prices have not only been pulled up by a strong demand and high steel prices, but supply, mostly from Brazil, has also been constrained.

There have also been a lot of fires.

The experts at Roskill reckon iron ore prices will continue to surprise to the upside.

“… iron ore supply will remain constrained for the rest of 2021 and possibly into 2022,” it says.

“In the next couple of years, China’s steel production will peak and with the development of Electric Arc Furnaces (EAFs), a decoupling between pig iron and steel production will take place.

“Softening steel prices in H2 2021 could also translate into lower iron ore prices, but overall Roskill believes that they will remain stronger for longer than market expected.”

Here’s how ASX-listed iron ore stocks are performing:

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Small Cap Standouts

Red Hill Iron (ASX:RHI) continues to find strong demand from investors, posting a red hot 14-day RSI of 95 as iron ore prices pushed above $US200/tonne.

Red Hill has a 40 per interest in the Red Hill joint venture project in WA’s West Pilbara region in partnership with Aquila Steel, part of China’s Baosteel Group.

Mine developer Magnetite Mines (ASX:MGT)  was up 28% after announcing a share placement at a premium to its recent trading price.

Brand new iron ore producer GWR Group (ASX:GWR) gained last week, although sadly one of its contractor’s trucks rolled over, resulting in a fatality.

Venture Minerals (ASX:VMS) is on track to be Australia’s next iron ore miner at its Riley mine in northwest Tasmania.

On April 21 the company said it was just two weeks from commissioning the plant.

“This timing puts the first iron ore shipment on track for this quarter and puts the company in a strong position to take advantage of the historically high iron ore prices,” Venture Minerals managing director Andrew Radonjic says.

Also making significant gains were major producers BHP (ASX:BHP), Rio Tinto (ASX:RIO), Mount Gibson Iron (ASX:MGX) and Fortescue Metals Group (ASX:FMG).