BHP hits year-to-date share price peak as iron ore reaches $US105/t on China's big dam build and steel cuts
Iron ore futures in Singapore jumped $US1.60 per tonne on Tuesday to trade at $US105/t ($161) after leaping over the $US100/t ($153) barrier late last week.
This benchmark price has now rallied 11 per cent since touching lows of $US92/t ($141) less than a month ago — defying predictions by local and international banks that the commodity's value drop would below $US90/t ($138) this year.
Iron ore's recent price spike has been attributed to China starting construction on the world's biggest hydropower dam in Tibet.
The dam, once complete, will reportedly generate the same amount of energy each year as the entire United Kingdom.
The $255 billion infrastructure project requires significant volumes of steel and subsequently boosts demand for steel-making ingredient iron ore.
Shares in Australia's major iron ore producers have recorded strong gains over the past few trading days and continued the ascent on Tuesday.
Stock in BHP, Australia's biggest miner by market value, rose 2.6 per cent to $41.51 —its highest level since December. Rio Tinto finished up 3.4 per cent at $118.32 and Fortescue lifted 3.3 per cent to $17.81.
But Commonwealth Bank analyst Vivek Dhar said the Tibet dam breaking ground was 'unlikely' the sole reason iron ore has rebounded beyond $US100/t.
'We continue to attribute most of the price increase to supply‑side reform in the steel sector,' he said.
'These reforms primarily aim to curb 'involution,' whereby intense competition and overcapacity has crushed margins across several industries.'
Competition between China's steel mills has eaten into profit margins, jeopardising the steady supply of steel to the Asian powerhouse's key manufacturing and property sectors. This has led Beijing to intervene with orders limiting steel output across China.
How this plays out for iron ore in the longer-term is difficult to predict, according to Mr Dhar.
Mandated steel output cuts mean mill owners are usually willing to pay a premium for iron ore, but lower output means an iron ore oversupply could then emerge and drag the commodity's price down.
Mr Dhar believes the oversupply scenario is likely.
'It is this logic that underpins our view that the recent rally in iron ore prices is unsustainable,' he said.
'It's worth noting that it is possible for supply‑side reform in China's steel sector to result in sustainably higher iron ore prices. We would need to see outdated and unused steel capacity exit the market.'
Citi analyst Paul McTaggart echoed Mr Dhar's sentiment.
'Citi remains cautious on this iron ore rebound; steel production cuts in China should favour steel pricing rather than iron ore pricing,' Mr McTaggart told clients.
'However, for now the interest seems to lie with iron ore and its exposed equities.'
Mr Dhar said CBA is predicting iron ore will fall to $US95/t by year's end. Australia's biggest bank had originally expected iron ore to sink to $US80/t this year.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
AU Financial Review
7 hours ago
- AU Financial Review
ASX set for modest dip; US-China tipped to extend trade truce
Equity markets are staring down a high-stakes week, with earnings season, key inflation data and a US Federal Reserve meeting all on the radar – and plenty of scope for volatility as the ASX hovers near record highs. Local futures are pointing to a modest dip at Monday's open, even after Wall Street pushed higher again, with the S&P 500 notching its fifth consecutive record close. The Fed's interest rate decision, due Friday morning AEST, is likely to set the tone. While no change is expected, Chair Jerome Powell's remarks will be closely parsed for hints of a potential September cut — especially with economic data showing mixed signals. Non-farm payrolls and the central bank's preferred inflation measure are also due this week. Back home, Rio Tinto kicks off earnings season, while Wednesday's CPI report looms large. The Reserve Bank has flagged that any policy shift hinges on fresh inflation data, and a soft enough read could pave the way for a rate cut in August. Westpac expects headline inflation to come in at 0.9 per cent for the June quarter, or 2.3 per cent annually. The RBA's preferred trimmed mean is tipped to rise 0.7 per cent, to an annual pace of 2.7 per cent. With global equities on a tear and the ASX just 1 per cent shy of its own all-time high, some strategists are starting to question how far this rally can run. 'Bubble is a big word, but the notion that the sharemarket is egregiously overvalued is one that I am sympathetic to,' said GSFM's Stephen Miller. 'These things can go on for a while, but markets have a tendency to walk up the stairs and down the elevator shaft. But I think there comes a time, too, when people like me who have been defensive haven't got that right, yet.'
News.com.au
8 hours ago
- News.com.au
Kristie Batten: Asian Battery Metals eyes scale-up of copper-nickel discovery
One of Australia's top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene. Asian Battery Metals (ASX:AZ9) believes it may have made a significant copper-nickel-platinum group element discovery at its Oval project in Mongolia. AZ9, which listed on the ASX last year, was previously focused on its more advanced graphite and lithium projects in Mongolia, though Oval was selected to be part of BHP's Xplor exploration accelerator in 2023. The company used the US$500,000 of funding provided by the program to drill Oval. In October 2024, AZ9 reported a hit of 8.8m at 6.08% copper, 3.19% nickel, 1.63 grams per tonne platinum, palladium and gold (E3) and 0.11% cobalt, or 12.57% copper equivalent from 107.2m. Since then, the company has been focused on expanding the scale of the discovery. Earlier this month, AZ9 reported an intersection of 8.7m at 2.44% copper, 1.52% nickel, 1.4g/t E3 and 0.06% cobalt from 112.8m, including 2m at 3.72% copper, 3.82% nickel, 1.65g/t E3 and 0.16% cobalt, 130m down-dip of a previous intercept. The results suggest semi-continuous mineralisation extends over 800m, including North Oval and the Oval gabbroic intrusion. Planning underway The recent focus for AZ9 has been electromagnetics to define targets for the next round of drilling. 'Electromagnetic is the go-to tool for this type of mineralisation, so we brought Gap Geophysics, the Australian company, to the field, and they are working currently,' AZ9 managing director Gan-Ochir Zunduisuren told Stockhead. 'Based on that work, we're hoping that we'll have multiple targets to drill on top of whatever we have from our ground EM work.' On Friday, AZ9 announced that the ground-based fixed loop electromagnetic survey at Oval was halfway through but had already resulted in 29 conductive plates being modelled across four target zones. Six priority one plates have been identified with strong geophysical responses. The focus of the remainder of the program is the deeper zones and step-out targets, including MS1, MS2 and Quartz Hill targets. Zunduisuren said the program to date had delivered the results the company were hoping for. 'I think the next stage of drilling is going to be quite instrumental for us,' he said. Drilling is set to resume in early August, while the first round of metallurgical test work results will also be released this quarter. 'The strategy for this year is to really show the size and the extent of the mineralisation to get the feeling of how large the potential is, and if we can get that by the end of the year, next year we're going to drill for a resource,' Zunduisuren said. 'We have very limited historic information. This is a brand new area, even in Mongolia, in the southwest part where we are working. 'I don't think there have been any historic magmatic mafic intrusion-related copper and nickel sulphide systems before, so this is brand new in this sense, so we really have to do everything from ground up. 'That's why we certainly believe that there is definitely a potential for camp-scale or clusters of orebodies within a few kilometres or a few tens of kilometres from each other.' Mongolia still emerging Despite Mongolia being home to Rio Tinto's massive Oyu Tolgoi copper-gold mine, Zunduisuren said it was still misunderstood as a destination. 'The last round of real investor interest was in the early 2000s,' he said. 'That's when we had a big flow of investment from Australia and Canada, especially in the gold space in Mongolia, and then the copper space. 'Knowing all the moving parts there, I think Mongolia will probably become quite interesting for investors over the next few years.' Zunduisuren said Mongolia was a mature mining destination with the right regulatory frameworks in place to support the industry. 'Infrastructure wise, it's vastly improved over the last 15 years,' he said. 'Just based on that, it's way better positioned to attract investment than 15 years ago.' The ASX's only other Mongolia-focused copper player, Xanadu Mines, is set to disappear shortly after accepting a $180 million takeover offer. Xanadu accepted the 8c per share offer – a 57% premium – and the acquirer Bastion Mining moved to compulsory acquisition on Friday. It will result in one less copper developer on the ASX, a space which is already reasonably thin. 'I think the key for larger institutional investors or corporates, they're definitely looking, of course, and observing how we progressing further,' Zunduisuren said. 'To really make their minds up, there's two things that need to be there. One is a quantity. The other is quantity. 'With our current results, we have shown there's definitely a quality of the product there, but we need to show the quantity and that's the whole strategy of this year's exploration.'
AU Financial Review
9 hours ago
- AU Financial Review
KKR takes $500m punt on solar and storage play CleanPeak Energy
Private equity giant KKR is ploughing $500 million into a solar and storage start-up co-founded by a former Citi banker, in a landmark investment in the sector targeting rooftop panels and battery installations on shopping centres and industrial premises. The investment in CleanPeak Energy is being made under the global powerhouse's climate transition strategy, which has so far committed more than $US34 billion ($51.9 billion) to climate and environmental sustainability ventures.
