Iron Ore Price Continues to Rise as Chinese Economy Maintains Strength

Iron ore prices continue to rise, with 58% fines leading the way as the Chinese economy continues to maintain its strength, despite the threat of more tariffs.

According to Metal Bulletin via Business Insider, 58% fines rose 2.9% to $82.48 a tonne, 62% fines were up 0.2% to $94.34, and 65% fines fell by 0.2% to $109.60.

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Lower inventories, construction sector boost

Iron ore inventories fell by 2.4 million tonnes to 133.6 million tonnes, while China’s services sector grew at its second fastest rate since May 2012.

This includes its construction industry which has been aided by a move by Chinese regulators to reduce the reserve requirement ratio (RRR) for small and medium lenders, in turn releasing additional funds into the private sector.

Chinese stimulus efforts have been described as ‘modest’ so far, but it is possible further efforts to boost its economy are in the offing.

Trade war fears resurface, iron ore demand could be impacted

Trump fired off two tweets over the past 48 hours that resulted in a sharp sell-off for Chinese stocks.

This was the first:

Source: twitter.com

And this was the second:

Source: twitter.com

The prospect of a collapse in talks, precipitated by increased tariffs, could have flow-on effects to iron ore and commodities more generally.

With this downside risk growing then, perhaps it could be wise to begin considering your position in companies like Fortescue Metals Group Ltd [ASX:FMG], Rio Tinto Ltd [ASX:RIO] and BHP Group Ltd [ASX:BHP].

While my colleague Phil Anderson believes that a mid-cycle slowdown is still a ways off, it is always worth thinking ahead.

China is in the process of doubling down on nuclear power, which could trigger a uranium renaissance, and in turn could make this commodity the one commodity that escapes a global economic downturn.

For a more in-depth look at this, refer to this free report on the ‘Uranium Comeback’.

Finally, in mid-March we suggested readers have a look at Mount Gibson Iron Ltd [ASX:MGX].

While we had been watching it closely for a while, it has made nearly a 20% return since we first discussed it.

Not bad.

Regards,

Lachlann Tierney,
For Money Morning