Iron ore climbs to highest level since May

Confidence is returning to the market as the commodity soars, but is it sustainable?

Ryan Newman (TMFNewmy)

Ryan Newman (CFA) is the Director of Research of The Motley Fool Australia, and Portfolio Manager for the Pro and North Star services. Ryan’s interest in investing and stocks began at a young. His journey with The Motley Fool started first as a member but when the company first came to Australia he joined the team as one of our writers. Recognising his investing talent and passion, it wasn’t long before he was approached to join the investing team as a research analyst on Pro. Ryan is passionate about learning and continual development. He earned his Chartered Financial Analyst (CFA) designation in 2022, and has completed his Bachelor of Accounting and his Graduate Certificate of Corporate Finance. Ryan loves spending time with his young family as well as non-fiction reading, catching the latest movies and following his sports team, the St Kilda Saints (AFL).

Published July 5, 2013 12:23 pm AEST

Iron ore miners are set for a good day on the market following the resource's 1.24% climb to US$122 per tonne overnight to its highest level since May, according to The Steel Index.

Yesterday, a number of the commodity's miners surged, as steadily increasing prices are giving investors confidence that there are, indeed, still gains to be made. Pure iron ore miners Atlas Iron (ASX: AGO) and Fortescue Metals Group (ASX: FMG) saw impressive gains of 9.9% and 6.8%, whilst heavyweights BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) increased by 0.55% and 1.3%, respectively.

Despite its recent spur however, a number of analysts have lowered their forecasts for the commodity in the short to medium term, believing that current demand is predominantly coming from Chinese mills restocking inventories. National Australia Bank has set its price at US$100 for 2014 whilst Australia's Bureau of Resources and Energy Economics (BREE) estimates it will sit at around US$112.

Today, BHP, Rio, Fortescue and Atlas are up 1.92%, 2.15%, 3.94% and 2.4% in early trading, respectively.

Foolish takeaway

The mining sector has been largely avoided by investors in recent times as Chinese growth continues to slow down. The volatility will remain high for some time yet, but as heavyweights fall lower and lower, they may be good options for long-term investors. For the meantime however, it is best to remain on the sidelines for more attractive entry points.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.