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Here’s What’s Driving Iron Ore Prices through the Roof

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Iron ore prices surge

Iron ore prices have remained stubbornly resistant in 2016, but they reached a six-month high of $62.7 per ton on October 26, 2016, which brings the YTD (year-to-date) gains for the commodity to an impressive 46%.

Metallurgical coal, which was trading at $270.8 ton on October 25, has seen even more dramatic piece rises in 2016, gaining 27% in October alone. Thermal coal prices have also almost doubled YTD in 2016.

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The rally in the initial months of 2016 in iron ore was driven by the stimulation provided by Chinese consumption, followed by speculative activities. The most recent rally came primarily from supply shortages of coking coal, another important ingredient used in making steel. This led to a rise in steel prices, which pulled up iron ore.

Performances of iron ore miners

With stronger iron ore prices YTD (year-to-date), iron ore miners have recuperated from some of their losses. Cliffs Natural Resources (CLF) has outperformed with a YTD rise of 270% as of October 24, 2016.

Fortescue Metal (FSUGY) and Vale SA (VALE) have risen 175% and 105%, respectively. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen 13% and 24%, respectively.

In this series

In this series, we’ll analyze the supply-demand fundamentals for iron ore and see why iron ore have started surging again after taking a breather in September. We’ll also see the outlook for iron ore prices for the remainder of 2016 and beyond.

We’ll also look at Chinese (FXI) steel production growth, supply-side growth, speculative trading, inventory, and analyst recommendations in order to arrive at a potential future upside or downside in prices. These factors should help you get a clearer view of the future direction of iron ore prices.

In the next part, we’ll look at the brokers’ view of iron ore prices and mining companies.

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