Iron ore price surges 5%

The price of iron ore jumped on Monday with the Northern China benchmark import price gaining 4.9% to $55.90 per dry metric tonne (62% Fe CFR Tianjin port) according to data supplied by The Steel Index.

Iron ore is trading well below the year high above $60 reached in early March, but is the top performing commodity for 2016 with a 30.3% rise year to date and a 51% surge from near-decade lows reached mid-December.

Investors appeared to take the CEO of the world's top producer at his word chasing Vale's stock 8.9% higher

On Monday, Vale chief executive Murilo Ferreira said he expects the commodity price to hold between $65 and $80 over the long term, according to media reports.

Investors appeared to take the CEO of the world's top producer at his word and chased Vale's stock 8.9% higher in New York. At 49m shares it was the fourth most traded share on the NYSE on Monday. Number two
Rio Tinto, BHP, and Anglo American all showed strong gains.

On Friday Australia’s Department of Industry, Innovation & Science, following a string of forecast cuts, also painted a more rosy picture for iron ore.

Iron ore price surges 5%

The government forecaster in its latest quarterly report adjusted upwards its iron ore price forecast by 9% and now expects prices to average $45 a tonne this year compared to the $41.30 per tonne prediction it made in December (which itself was downward adjustment from the $51.20 the body predicted in September).

Prices will continue to improve to average $56 next year  rising to above $60 in 2018. Five years out iron ore will be trading at $64.70, the department estimates. The prices used by the department are free-on-board Australia. Freight rates have hit rock bottom and the West Australia–China route adds only around $5 a tonne to the price, while from Brazil shipping costs are below $10 a tonne.

Iron ore's strong showing have caught many by surprise.

The rebound goes against most predictions – Goldman Sachs expects price to average $38 this year (Q1 average is $48). Producers themselves are also pessimistic – number three producer BHP's Andrew Mackenzie last month told the industry to "prepare for lower-for-longer".