Iron ore breaks the $60 per tonne barrier, extending week’s rally to 9%

Iron ore prices continued its strong week Thursday, taking the gains seen since Monday to nearly 9% and to almost 40% so far this year.

Iron ore has spent much of this year defying analysts’ predictions for a sustained slump due to a flood of new supply.

The spot price for benchmark 62% fines added $2.07 to $60.70 overnight, according to The Metal Bulletin, after jumping the previous day to $58.57, the highest since July 13.

The commodity has spent much of this year defying analysts’ predictions for a sustained slump due to a flood of new supply that was supposed to overwhelm demand as China's economy slowed.

Analysts at The Metal Bulletin noted the gains coincided with a surge in Chinese steel prices, following a steep rally in rebar futures.

Those at Goldman Sachs have now hiked their short-term outlook for iron ore, saying the commodity will trade at $50 a tonne in three months and $40 in six months.

Iron ore breaks the $60 per tonne barrier, extending week’s rally to 9%

"We maintain the long-term target of $35/t but highlight the potential for continued price volatility until steel inventories normalise," the analysts wrote on July 27.

A supply glut fed by the world’s biggest producers, Vale, Rio Tinto and BHP Billiton, drove prices down about 70% in the past five years, pushing higher-cost companies out of the market.

Still, new supply from Roy Hill in Australia, Anglo American’s Minas Rio and Vale’s S11D in Brazil is expected to outpace demand for some time.