China bulls drag iron ore price past $130
The iron ore price jumped more than 1% on Wednesday to above $130 a tonne for first time since April.
The benchmark import price of 62% iron ore fines at China's Tianjin port climbed $1.40 to trade at a two-and-a-half month high of $130.40 a tonne according to data supplied by The Steelindex.
Recent strength in the iron ore price comes on the back of an improvement in China's steel industry which consumes 65% of the 1.2 billion tonne a year seaborne trade.
China produces steel at almost the same rate as the rest of the world combined and on Wednesday Shanghai rebar, the most actively traded steel futures contract worldwide, hit a near 3-month high of 3,679 yuan ($600) up from 2013 lows of $558.
Steelmakers were also encouraged by China's premier Li Keqiang who hinted that the government would do more support the world's second largest economyas it slows down from double digit growth rates a few years ago and the country's new leadership commits to free market reforms:
"Neither should we change policy orientation due to temporary economic fluctuations, which may affect the hard-won restructuring opportunity, nor should we lack vigilance and preparations when the economy might slide below the reasonable range," Li was quoted as saying.
China's move away from total centralized control of the economy is designed to curb overinvestment in Chinese infrastructure – vide the many ghost cities and bridges to nowhere – and improve the country's giant lumbering and inefficient state-owned enterprises.
China's iron ore market has been opening up rapidly.
The country's first non-official iron ore trading platform began operations earlier this month and last month it moved to scrap a decade-old import licensing system to eliminate middlemen who charge commissions for importing ore.
The higher price for the steelmaking raw material also comes despite record setting production at the world's largest iron ore miners.
Rio Tinto (LON:RIO) reported this week its Australian operations is set to hit 290 million tonnes output capacity this year while BHP Billiton (LON: BHP) announced its on target to hit a 220 million tonne annualized production rate sooner than anticipated.
The world's number one iron ore miner Vale SA (NYSE:VALE) has been struggling to keep up with the Anglo-Australian giants, the Brazilian company is nevertheless sticking to its medium term expansion plans to lift its output above 400 million tonnes from the current 320 million tonnes.
The Big 3, which enjoy mouthwatering margins of as much as $80 a tonne, have also been able to muscle out the competition.
The world's fourth largest mining company, Glencore Xstrata, announced this week its halting Australian iron ore production, ending a two-year attempt to gain a toehold in some of the richest iron fields in the world.