Iron ore has rallied above US$100 a ton (0.9 metric tonnes), surging to the highest since 2014, as investors bet that a global supply crunch will spur a scramble for cargoes just as China’s mills push out record volumes of steel.
Benchmark spot ore climbed 2.5 percent to US$100.35 a ton, Mysteel Global said.
Earlier, most-active futures in Singapore jumped as much as 3.8 percent, while miners’ shares powered ahead, with Fortescue Metals Group Ltd hitting the highest since 2008.
Iron ore has staged a stunning rally this year as supply disruptions in Brazil and Australia, the top shippers, spurred forecasts the seaborne market will swing to a deficit.
At the same time, Chinese mills have been producing record quantities of steel, underpinning expectations for strong import demand. That means, while other materials, such as copper, have been harmed by concerns the US-China trade spat would hurt demand, iron ore has vaulted higher.
The genesis of the rally was a tragedy in Brazil in January, when a Vale SA dam burst, triggering a slew of mine curtailments as its operations came under intense scrutiny.
This week, state prosecutors recommended Vale warn people that a structure at its Gongo Soco mine might be close to breaking point.
“Part of the reason for this rally has been the risk of another dam collapse for Vale that is unfolding before us now,” Hui Heng Tan, an analyst at Marex Spectron Group, said by e-mail. “Such contagion risk would only cast more doubt as to whether the Brucutu mine, which is in the same region, will reopen.”
On Thursday, a senior Brazilian official said that nationwide production might shrink by 10 percent this year, with the outlook for next year still unclear.
Sanford C. Bernstein & Co estimated that the world’s top miners, including Vale, would ship about 283 million tons this quarter, 10 percent lower year-on-year.
Miners have benefited as prices surged. Australia’s Fortescue Metals Group Ltd has more than doubled its market value this year after raising dividends, while top US producer Cleveland-Cliffs Inc and Anglo American PLC’s Kumba Iron Ore Ltd have jumped.
On Friday, BHP Group and Rio Tinto Group climbed in Australia.
Iron ore hitting US$100 vindicates predictions from market watchers including Citigroup Inc, Barclays PLC and Clarksons Platou Securities Inc, all of which flagged the potential for a gain for the raw material into three figures.
In other commodities, spot gold on Friday ended at US$1,277.53 per ounce, down 0.9 percent for the week.
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