Iron Ore Price Hits 10-Week High

The iron ore price has been on an impressive run, reaching a 10-week high on Thursday, as stocks at Chinese ports continue to fall. The Asian nation’s imports of the steelmaking raw material dropped 14 percent in August from the previous month. Limited availability of cargoes for immediate shipment suggests further gains for the metal.
Iron ore for immediate delivery to China’s Tianjin port gained 0.9 percent to US$56.90 a tonne, the highest since July 1, according to The Steel Index. The spot benchmark has now risen 29 percent since hitting a decade-low of US$44.10 in July.
As of September 4 iron ore inventory at major Chinese ports was at its lowest point since June, sitting at 80.1 million tonnes, according to the Australian Financial Review.
While China’s steel demand usually picks up in September along with construction activity after the summer lull, the country’s crude steel consumption has continued to drop this year and its industrial activity have also slowed after decades of speedy growth.

“We believe the rally will be short-lived, with slowing steel demand and increasing challenges to Chinese steel export,” the Australia and New Zealand Banking Group told the publication.
Conversely, Chinese Premier Li Keqiang said he is confident that the government will meet its growth target this year.
Still, while the iron ore futures markets were definitely influenced by the surge in Chinese stocks, the iron ore spot price boost was likely due to Chinese mills returning to the market to replenish stocks aftera public holiday in the country last week, along with the supply shortage at Chinese ports, as per a report from Business Insider.

Company news

In line with the break from the price rout, a number of iron ore companies have also been doing well this week, many of which are located in Australia. One example is Iron Road (ASX:IRD), which just signed a non-binding memorandum of understanding (MOU) with Chinese steel companies to support off-take agreements for its Central Eyre project. To date, the company has signed deals with five Chinese steel companies in order to potentially provide iron ore from Central Eyre under long-term supply agreements.
“Our high-quality product from Central Eyre offers significant advantages for steel mills intent on running the most efficient and environmentally compliant operations, hence the strong interest we have received from a number of parties,” Iron Road’s managing director Andrew Stocks told Mining Weekly. “The MoUs are aimed at establishing a detailed understanding of the commercial and technical benefits the Central Eyre product will deliver for steel mills, prior to entering into letters of intent for the long-term supply of iron-ore product from the project.”

Meanwhile, despite difficult times in the iron space, Grange Resources (ASX:GRR) has managed to stay ahead, reporting an after-tax profit of $33.3 million in the six months ending June 30. The company said that despite one of its two 48-year-old mills being shut for 65 days earlier this year, it is still on track to match its 2014 production, thanks to a successful mill refurbishment.
Moving forward, Grange intends to proceed with the refurbishment of its second mill in the second quarter of 2016 and expects it to be shut for about 55 days. The completion of the two mill upgrades should increase total production capacity to 2.7 million tonnes per annum, and is expected to significantly reduce the operating risks.
At end of day Thursday, Grange was up 4.76 percent to close at A$0.11 and year-to-date the company is down 8.33 percent.
Finally, Atlas Iron (ASX:AGO) also reported strong output levels, achieving its target production rate of 14 to 15 million tonnes per annum in August, four months ahead of schedule. Full cash costs for August also declined from A$66 per tonne in Q2 down to A$56.52 per tonne, as the company continues to cut costs.
At end of day Thursday, Atlas was up 3.23 percent, closing at A$0.032. Year-to-date, the company is down 86.09 percent.
 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. 
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