Iron ore is hot right now – by Bloomberg News (National Post – November 11, 2013)

The National Post is Canada’s second largest national paper.

Iron ore is extending a bull market on record sales to China that are spurring forecasters from Morgan Stanley to the World Bank to increase price predictions.

Shipments from Australia’s Port Hedland, the biggest iron- ore export terminal, to China jumped 43 percent to a record last month, port data show. The Asian nation already imported the most ore ever in September, according to customs data. Standard Bank Group Ltd. and the Bureau of Resources and Energy Economics, Australia’s state forecaster, also increased price estimates in the past several weeks.

Prices reached a two-month high in China last week after data showed Asia’s largest economy accelerated. While supply expansions led by Australian producers will push the seaborne market into surplus next year for the first time since 2010, it won’t happen until the second half, said Joel Crane, an analyst at Morgan Stanley. Iron ore is the biggest source of revenue for Rio Tinto Group, BHP Billiton Ltd. and Vale SA and the largest seaborne commodity cargo after crude oil.

“It’s coming, just not yet,” said Melbourne-based Crane. “There’s more demand than supply and there will continue to be more demand than supply into next year. Then, as Rio and BHP ramp up and Vale gets its first net expansion in a year, then you should start to see supply growth maintain the pace of demand growth.”

Ore at China’s Tianjin port reached $137.10 a metric ton on Nov. 6, the most since Sept. 5, after rallying from a seven- month low in May. The commodity used to make steel entered a bull market in July as China’s economy snapped a two-quarter slowdown, paring the ore’s drop this year to 6.2 percent. The Standard & Poor’s GSCI gauge of 24 raw materials, which doesn’t include iron ore, declined 4.9 percent.

Supply in the seaborne market will fall 25 million tons short of demand in the first half of 2014, before a 49 million- ton surplus emerges in the final six months, Morgan Stanley estimates. Prices will average $130 in the first quarter and $120 in the second, from earlier estimates of $125 and $117, the bank said in a report last month.

Trade in iron ore will expand 7.1 percent to a record 1.27 billion tons next year, according to Clarkson Plc, the world’s biggest shipbroker. China’s imports will advance 9.5 percent to 865 million tons, the fastest growth in three years, the London-based company estimates.

China’s economy expanded more than fivefold in the past decade, adding almost $7 trillion to gross domestic product. While the expansion may slow to 7.4 percent in 2014 from 7.6 percent this year, that’s almost three times the expected pace of U.S. growth, economist forecasts compiled by Bloomberg show.

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