17/07/14 – Iron-ore Producers’ Rally: Shares Trade Higher

Shares of iron ore producers were trading higher as China’s iron ore futures steadied near seven-week highs on Wednesday after data showed the Chinese economy grew slightly faster than expected in the second quarter.

Iron ore prices, both futures and spot, rose to their highest level since late May on Tuesday ahead of the data on expectations that China would continue with stimulus measures, including infrastructure spending, to aid growth.

The world’s No. 2 economy expanded 7.5 percent in April-June, quicker than the 7.4 percent that economists had predicted, although they said further state support is likely needed to meet the government’s growth target this year.

Separately, Rio Tinto is betting that Chinese iron-ore demand will remain strong, helped in part by government spending on projects that need large amounts of steel, such as subways and airports.

China imported 457 million tons of iron ore in the first six months of the year, up 19% from a year earlier, according to recent customs data. China buys three in every five tons of iron ore shipped by global mining companies.

Rio Tinto PLC produced record volumes of iron ore in its fiscal first half, after expanding several vast mines in the Australian Outback even as prices of the steelmaking ingredient tumbled. The move show how Rio Tinto is deepening its reliance on a commodity used in everything from cars to apartment blocks for profit, despite concerns among some investors that global mining companies are adding new supply too quickly. Several fund managers recently cut their holdings of mining shares, including Rio Tinto’s stock, on worries about a looming supply glut of iron ore that could take years to clear.

On Wednesday, Rio Tinto said it produced 139.5 million metric tons of iron ore in the six months through June, up 10% from a year earlier. Its shipments rose 20% to 142.4 million tons.

“Our iron ore expansion continues to deliver high-margin growth reinforcing our position as a low cost producer,” Rio Tinto Chief Executive Sam Walsh said in a stock exchange filing.

In the remote Pilbara region of Western Australia, Rio Tinto has invested billions of dollars to expand mines capable of feeding this demand. The company in June hit a target of being able to produce 290 million tons in the Pilbara on an annual basis, and plans to spend a further $2 billion (U.S.) to increase output by more than 20% within three years.

Cliffs Natural Resources Inc (NYSE:CLF) was leading rally followed by Vale SA (ADR) (NYSE:VALE), United States Steel Corporation (NYSE:X) and ArcelorMittal SA (ADR) (NYSE:MT).

Source – MarketsEmerging.com