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Iron Ore Price Performance Puts Contrarian Views to Shame

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Aug. 30 2016, Published 4:59 p.m. ET

The iron ore price rally

Commodity (COMT) producers, especially iron ore producers, have experienced nothing short of a miracle in 2016. Despite the majority of market participants believing the contrary, iron ore prices have rallied in 2016. On August 29, 2016, iron ore prices had gained 36% year-to-date (or YTD).

On the whole, iron ore prices have been quite volatile. This has raised several questions regarding the cause of the spike and whether such price rallies are sustainable.

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Performances of iron ore miners

Given stronger iron ore prices YTD, iron ore miners have recuperated from some of their losses. Cliffs Natural Resources (CLF) has outperformed with a YTD rise of 258% on August 29, 2016.

Fortescue Metal (FSUGY) and Vale (VALE) have risen by 158% and 76%, respectively. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen by 9% and 16%, respectively.

In this series

In this series, we’ll analyze the supply-demand fundamentals for iron ore and see whether the commodity’s recent surge can continue for the remainder of 2016 and beyond. We’ll look at Chinese steel production growth, supply-side growth, speculative trading, inventory, and analysts’ recommendations in order to arrive at a potential future upside or downside in prices. These factors should help you form a view on the future direction of iron ore prices.

In the next part of this series, we’ll look at the progression in iron ore shipments.

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