BHP Billiton’s (BHP) decision to slow the final part of its expansion at Port Headland helped give global iron ore prices their best day’s trading for more than two years overnight with prices up more than 4%.
The Steel Index spot price jumped to $US52.90 a tonne, up 4.1% from its prior close of $US50.80 a tonne.
And the other major price source, from the Metal Bulletin, surged 5.9% to $US54.04, its largest one-day gain for over two years.
The spot price bottomed at just over $US46 a tonne just over a week ago, so the price rise is up more than 13% in the past five trading days.
The news will give heart to small and medium producers who have been battered by the price slide – starting with Fortescue Metals Group (FMG) and then Atlas Iron (AGO).
The Financial review says talks are due to be held today in Los Angeles between Atlas and its major funders and some of its major contractors, including Qube (QUB) and McAleese Transport (MCS).
According to the AFR report, Atlas and its contractors want the US based funders to agree to keep one or two of Atlas’s Pilbara iron ore mines open.
McAleese, whose shares remain suspended until next Monday, at least, is reported to be the lead contractor pushing for the mines to be open (its Atlas contracts provide 50% or more of earnings and without them, the company will have trouble convincing its creditors that it should remain in business).
Fortescue will take some heart from the price rise after Standard & Poor’s became the second ratings group to downgrade the iron ore miner’s credit standing last night.
Overnight the London-listed shares of both BHP and Rio Tinto rose solidly in the wake of the production reports from both companies and the news of the latest price rise. BHP shares jumped 1.4% (which will offset yesterday’s 1.7% drop here), while Rio shares rose 1.8%.
Shares in the other global iron ore major, the Brazil-based Vale surged more than 9% overnight.
These moves and the price rises mean a strong day for the iron ore sector.
The futures market has the ASX opening around 10 points higher this morning after Wall Street ended with gains.
