Iron ore price climbs to 6-week high as Australian exports hit record

The iron ore price jumped again on Friday, bringing its gains for the week to more than 5% and reaching its highest level since May 20.

The benchmark import price of 62% iron ore fines at China's Tianjin port now trades at $122.60 a tonne according to data supplied by The Steelindex.

The strength comes on the back of a rise in the price of Chinese steel. Chinese prices are the most closely watched – the country forges almost as much steel as the rest of the world combined.

On Friday Shanghai rebar, the most actively traded steel futures contract worldwide, changed hands for 3,627 yuan ($590), well off its 2013 low of 3,422 yuan ($558) and the all-time record low of $550 hit September last year.

Reuters quotes a Hong Kong-based iron ore trader as saying "mills have had very lean inventories of iron ore in the past two months and some people think steel prices may have bottomed out. But iron ore may have reached a short-term peak for now. Prices have risen too fast and the market needs to digest the increase."

The price of iron ore is still off 20% from its 2013 high of $158 in February and despite the recent strength in the steelmaking raw material, most analysts still predict a steady decline in the price of iron ore towards the end of this year and into 2014.

A slowdown in China which consumes 65% of the 1.2 billion tonne a year seaborne trade and anticipation of vast new supplies primarily from the Big 3 producers – Vale SA (NYSE:VALE), Rio Tinto (LON:RIO) and BHP Billiton (LON: BHP) – hitting the market in the medium term are behind the negative outlook.

Despite the pervasive weak sentiment in the market, The SteelIndex reports China’s iron ore imports rose to 65.6 million tonnes in May, according to the latest customs data.

Over 50% of China’s intake that month came from Australia, and just 17% from Brazil, where producers continue to struggle with expanding output.

Iron ore exports from West Australia’s Port Hedland hit a record of 27.9 million tonnes in May before slowing only slightly in June to 27.7 million tonnes.