Iron ore rose for the first time in more than two weeks on speculation prices have fallen too far.
The price of iron ore with 62 percent iron content for immediate delivery to the Chinese port of Tianjin, a benchmark for Asia, rose 70 cents, or 0.8 percent, to $89.40 a dry ton today, according to a price index compiled by The Steel Index Ltd. The last time prices rose was on Aug. 14. Iron ore has declined about 50 percent over the past year amid weaker demand in China.
“It does look like prices have probably overshot to the downside,” Ric Deverell, global head of commodities research at Credit Suisse AG in London, said by phone today. “I would characterize what we’re seeing as signs of stabilization, but it’s probably too early to say that we’re out of the woods.”
As prices decline, steel producers in China may switch to imports from lower-quality and more expensive domestic ore, which will support the market in the first quarter, according to Deutsche Bank AG. Prices should rebound to about $100 a ton in the fourth quarter, Credit Suisse said in a report yesterday. Monthly crude steel production in China rose to a record 61.7 million tons in July, according to government data.
The steel-making ingredient is expected to rebound this year because current prices aren’t profitable for producers in China and other countries, Vale SA, the world’s largest iron-ore producer, said Aug. 27.
Prices could still “surprise to the downside” if Chinese iron-ore producers don’t scale down production and if steel output doesn’t recover, Credit Suisse said.