Iron ore contracts traded on China's Dalian Commodity Exchange extended strong gains on Monday, with the benchmark September contract up 5.21 percent to 434 yuan/tonne by the end of Monday day session. Australian iron ore mining giant BHP Billiton last week announced to delay the reconstruction work of Port Hedland, which indicates the company would not reach the original target of expanding annual output to 290 million tonnes by 2017.
Price of the imported 62-percent iron ore rebounded to 54.36 US dollars/tonne by Friday, up 15.5 percent from the bottom of 47.08 US dollars/tonne on April 2, statistics from China Iron and Steel Association showed. Meanwhile, VALE said its output of iron ore and nickel both refreshed the company's record high in the first quarter of this year. Market participants expect the Brazilian giant miner to follow suit of BHP Billiton to slow down the expansion pace. Nevertheless, major global investment banks remain cautious on the iron ore outlook, regarding it would be hard for the commodity price to keep rebounding for long.
Barclays expects the average iron ore price to be 56 US dollars/tonne in 2015, the highest among major banks. UBS forecasts it to be 50 US dollars/tonne for this year and Citibank said the average price could drop to 37 US dollars/tonne during the second half of 2015 before recovering to 40 US dollars/tonne by 2019. Generally speaking, the global iron ore supply is sufficient, while the demand from China is unlikely to recover shortly.
In its quarterly report last week, BHP Billiton reported a 20-percent increase in its iron ore output in March to 58.9 million tonnes. On Monday, benchmark rebar contract on Shanghai Futures Exchange rose 1.82 percent and bellwether hot-rolled coil contract gained 1.78 percent.
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