Is the Recent Iron Ore Price Rally Sustainable?
Iron ore price rally
Iron ore prices surged by 19% to $63.7 per ton on March 7, 2016, the biggest one-day gain since 2009. Year-to-date (or YTD), the commodity (COMT) has gained 23%. Prices have gained an impressive 45% since the almost decade low in December. However, since hitting the high, iron ore prices have been trending lower each day. This has raised several questions as to what caused the spike and whether or not such price rallies are sustainable.
Iron ore miners’ performance
With firmer iron ore prices, the iron ore miners have also recuperated their losses. On a relative basis, Cliffs Natural Resources (CLF) has outperformed with a YTD gain of 51% as of March 16, 2016. Fortescue Metals Group (FSUGY) and Vale (VALE) have also gained 41% and 25%, respectively. On the other hand, Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have lost 0.5% and 2.5%, respectively.
In this series
In this series, we’ll try to answer the above questions by analyzing the possible reasons that led to the spike. We’ll see if anything in the supply-demand fundamental space has changed so as to suggest a sustained price recovery. Finally, we’ll look at what the market thinks about iron ore’s recent price rally.
Browse this series on Market Realist: