Arab Today, arab today australian miners rally as iron ore price spikes 10
Last Updated : GMT 16:50:38
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Australian miners rally as iron ore price spikes 10%

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Arab Today, arab today Australian miners rally as iron ore price spikes 10%

The spot price of iron ore bounced
Sydney - AFP

Shares in Australia's big miners gained Friday as the price of iron ore spiked nearly 10 percent after China announced new measures to staunch a rout on its stock market.

The spot price of the commodity bounced back from its biggest one-day fall the previous day when it slumped 10 percent to $44.59 a tonne on the back of the free-falling Chinese market.

It regained virtually all of its losses overnight, analysts said, to climb 9.9 percent to $48.99 a tonne after Beijing launched fresh measures to halt the sell-off.

"Iron ore has had its largest single-day fall and gain in the space of 48 hours," IG Markets noted on Friday.

In early trade, BHP Billiton was 1.20 percent higher at Aus$26.19, Rio Tinto gained 1.14 percent to Aus$51.47 and Fortescue Metals was up 1.12 percent to Aus$1.80.

Australia's benchmark S&P/ASX200 index was up 0.7 percent at 5,509.9.
Australia is one of the world's biggest suppliers of iron ore, which is key to making steel, and China is its largest customer, with a diving price of the country's largest export impacting government revenues.

The iron ore price had already been declining in recent months on the back of increased supply by miners such as BHP and Rio, as well as softer growth in Chinese demand, with the Chinese volatility adding to the mix.

"This week's price collapse did invoke concern among some producers that supply may have to be curtailed if they (prices) remained at these levels," ANZ analysts said in a note on iron ore.

"However, the rally was clearly sentiment-driven as a rebound in Chinese equity markets eased concerns over underlying demand."

Even with the 10 percent price spike, most Australian miners would still be producing at a loss, with the exception of low-cost giants like Rio and BHP.

They have nevertheless been forced to cut costs although Rio's iron ore boss Andrew Harding maintains that the "long-term picture for iron ore remains sound" and the commodity would continue to be "a wealth generation machine for Australia".

He told the Australian Financial Review on Friday that the iron ore price was currently moving around its long-term average after coming off "unprecedented and unsustainable" highs.   

"We are seeing a pattern play out now that is entirely consistent with the history of all internationally traded commodities," he said.

In an effort to calm its markets, China has suspended trading in more than half of the country's listed stocks, banned new listings, is probing "vicious short-selling" and enlisted the help of the country's major stockbrokers through a huge stabilisation fund.

 

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