Ore soars but it’s no recovery

A RECORD one-day jump in the price of iron ore is not expected to be the spark of a meaningful recovery.

The price jumped almost 10 per cent to $US48.99 a tonne on Thursday night, after a record 10 per cent fall on Wednesday.

The rise ended a 10-session, 29 per cent losing streak in which the steelmaking commodity fell from $US62 a tonne to a 10-year low of $US44.10.

The falls are costing the federal and state governments billions of dollars in tax revenue and hurting the economy.

For optimists such as Atlas Iron managing director David Flanagan, the price rise reinforces his view that the lows are temporary, steel demand is growing and volatility is a “new normal”.

But IG market strategist Evan Lucas said it was difficult to find an economic argument to support a rise back to $US65 a tonne, which Mr Flanagan is predicting.

Demand for iron ore and steel is high in China, but has not grown since 2013, while supply has hit record highs and is still growing, he said.

China’s top steel industry forecaster expects a 2 per cent drop in steel output in 2015, amid weaker property and infrastructure demand.

“With current levels and future expectations, the price will either stabilise or possibly head a little lower,” Mr Lucas said.

Recent price volatility is related to a 30 per cent fall on China’s share markets in less than a month, which prompted the suspension of trading in more than half of all listed companies.

The only Australian iron ore miners making money are the biggest producers: BHP Billiton, Rio Tinto and Fortescue, with the last-named marginally ahead.