07 Dec ASX 200 shares surge as iron ore prices hit eight-year high
Australian shares closed Monday trading on another high after iron ore prices continued to soar, based on strong demand from China and supply concerns emerging from key iron ore producing country Brazil.
The ASX 200 closed up 0.6% to 6,675 points, while at one point during the day the benchmark reached its highest level since late February, when the wide-ranging impacts of the COVID-19 pandemic began to be felt.
Investor optimism surrounding the imminent roll out of COVID-19 vaccines has helped the Australian market surge by more than 12% in the last five weeks. It closed last Friday on a high for the fifth week in a row.
The latest rise on the ASX has been primarily driven by the iron ore price, which has increased by 5.8% to US$145 per tonne – its highest recorded level since March 2013.
CBA analyst Vivek Dhar said the rise was linked to declining iron ore port stockpiles in China – the world’s biggest buyer of the commodity, at roughly 70% of demand.
“China’s iron ore port stocks have now contracted for three consecutive weeks to December 4, indicating growing deficit conditions. The last time that happened was mid-June 2020,” said Dhar.
Iron ore prices have also been boosted following the release of reduced 2020 forecasts by Brazilian miner Vale SA last week.
Australia’s largest iron ore producers – Rio Tinto, BHP and Fortescue Metals Group (FMG) – have all enjoyed strong performances in recent weeks, particularly FMG. Mining magnate Andrew Forrest’s company finished last week on an all-time high of $20.61 per share.