Iron ore price rises due to disappointing performance of leading producers

Iron ore prices rose on Tuesday amid disappointing data from the world's largest producers.

Vale produced 75.7 million tonnes in the second quarter, up from an average analyst estimate of 78 million tonnes.

The company maintained its annual forecast of 315 million to 335 million tonnes and said it had achieved an annual production capacity of 330 million tonnes.

“The annual forecast for iron ore production of 315-335 million tonnes remains, but it will take a strong second half of the year to reach even the lower end of this range,” Christopher Lafemina, an analyst at Jefferies, told the Financial Times.

BHP said it will begin a "overhaul" campaign in Port Hedland, its key Western Australian iron ore transshipment facility, over the next three months.

Weaker-than-expected supply growth helped support prices, which were more than $ 220 /t on Tuesday, bringing huge profits to iron ore producers.

Rio Tinto said last week that its shipments were down 2% from the previous quarter and that annual exports could fall below its forecast, in part due to stronger-than-normal rains.

Bull market
According to Goldman Sachs analysts, the iron ore market has been in a bull market for more than two years and it will not end soon.

“It would be wrong to say that the iron ore bull market, as you know, is nearing completion,” said Nicholas Snowdon, Goldman's head of non-ferrous metals and bulk solids research, according to CNBC.

According to Snowdon, the market is likely to return to "comfort" only from 2023.

Prices are supported by strong demand from a leading steel producer in China.

“Even though China is showing some signs of slowing ... steel demand growth in the second half of the year and into 2022, steel demand dynamics in the rest of the world and in (developed markets) is incredibly strong,” Snowdon was quoted as saying in Singapore Iron Ore Forum.

“Australian manufacturers have almost completely depleted the availability of their infrastructure, so they cannot expand at any rate,” Rohan Kendall said during a separate panel discussion.

“I believe that prices above $ 200 per tonne are unacceptable, but we will probably see prices remain at around $ 150 per tonne,” predicted Eric Hedborg, chief analyst at CRU.