Current iron ore prices ‘money for old rope’: BC Iron

As iron ore is expanding a bull market on record sales to China, Australian BC Iron’s (ASX: BCI) managing director Morgan Ball  said Tuesday the company expected prices for the steel-making material to remain comfortably above $100 a tonne until at least 2015, The Australian reports.

According to Ball, the somehow unexpected windfall is basically “money for jam,” as the cash costs for its Nullagine mine —expected to be below $50 a tonne this year— meant its margins would remain robust.

Shipments from Australia’s Port Hedland, the biggest iron- ore export terminal, to China jumped 43% to a record last month, port data show. The Asian nation already imported the most ore ever in September.

In terms of price, iron ore is up 23% from its 2013 lows struck at the end of May, thanks to Chinese spending on infrastructure that boosted Australian iron ore exports to record highs.

The price surge has benefitted giant and medium producers alike. BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO), for instance, have seen their shares jumping 25% and 21% respectively.

But the is rest of Australia’s iron ore players, which seem to be the big winners. Mount Gibson Iron’s (ASX: MGX) has gained a whooping 111% since June 30, Arrium’s (ASX: ARI) has climbed 93% and Fortescue Metals Group (ASX: FMG) has risen 92%.

Recovery of iron ore prices comes after a recent report from the World Steel Association showed global crude steel production in September rose to a rate of 4.42 million tonnes per day — a strong 4.6% month-on-month surge and 6.1% jump over last year's figures.

Since then authorities in the area have risen their 2014 iron ore price forecast. In October, Australia’s Bureau of Resources elevated its predicted price to $119, up from $112 in June, citing Chinese demand. The World Bank said in a report last month that ore will average $135 next year, up from a July prediction of $125. Standard Bank expects prices to average $122 next year, 14% more than previously forecast.

Image by Don Bendickson