BHP hits year-to-date share price peak as iron ore | Australian Markets
China’s mega-dam construct helped spark an iron ore price revival that has lifted shares in Australia’s largest mining company to a 2025 high, however Beijing’s clampdown on metal mill cannibalisation is stoking uncertainty.
Iron ore futures in Singapore jumped $US1.60 per tonne on Tuesday to trade at $US105/t ($161) after leaping over the $US100/t barrier late final week.
This benchmark price has now rallied 11 per cent since touching lows of $US92/t much less than a month in the past — defying predictions by native and worldwide banks that the commodity’s worth would drop beneath $US90/t this 12 months.
Iron ore’s current price spike has been attributed to China beginning construction on the world’s greatest hydropower dam in Tibet.
The dam, as soon as full, will reportedly generate the identical quantity of vitality annually as your complete United Kingdom.
The $255 billion infrastructure project requires important volumes of metal and subsequently boosts demand for steel-making ingredient iron ore.
Shares in Australia’s main iron ore producers have recorded robust beneficial properties over the previous few trading days and continued the ascent on Tuesday.
Stock in BHP, Australia’s greatest miner by market worth, rose 2.6 per cent to $41.51 —its highest stage since December. Rio Tinto completed up 3.4 per cent at $118.32 and Fortescue lifted 3.3 per cent to $17.81.
But Commonwealth Bank analyst Vivek Dhar mentioned the Tibet dam breaking ground was “unlikely” the only real cause iron ore has rebounded past $US100/t.
“We continue to attribute most of the price increase to supply‑side reform in the steel sector,” he mentioned.
“These reforms primarily aim to curb ‘involution,’ whereby intense competition and overcapacity has crushed margins across several industries.”
Competition between China’s metal mills has eaten into revenue margins, jeopardising the regular provide of metal to the Asian powerhouse’s key manufacturing and property sectors. This has led Beijing to intervene with orders limiting metal output throughout China.
How this performs out for iron ore within the longer-term is tough to foretell, in keeping with Mr Dhar.
Mandated metal output cuts imply mill homeowners are normally prepared to pay a premium for iron ore, however decrease output means an iron ore oversupply might then emerge and drag the commodity’s price down.
Mr Dhar believes the oversupply situation is probably going.
“It is this logic that underpins our view that the recent rally in iron ore prices is unsustainable,” he mentioned.
“It’s worth noting that it is possible for supply‑side reform in China’s steel sector to result in sustainably higher iron ore prices. We would need to see outdated and unused steel capacity exit the market.”
Citi analyst Paul McTaggart echoed Mr Dhar’s sentiment.
“Citi remains cautious on this iron ore rebound; steel production cuts in China should favour steel pricing rather than iron ore pricing,” Mr McTaggart informed purchasers.
“However, for now the interest seems to lie with iron ore and its exposed equities.”
Mr Dhar mentioned CBA is predicting iron ore will fall to $US95/t by 12 months’s finish. Australia’s greatest bank had initially anticipated iron ore to sink to $US80/t this 12 months.
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