Down but not out, iron ore prices float to 5-week high

Hope for the beleaguered iron ore sector has come in the form of higher prices and signs that steel demand is picking up in China, Reuters reports. 

The price of the key steelmaking ingredient rose for two straight trading sessions to its highest level in five weeks, with fines from the Australian Pilbara offered at $143-145 per tonne. Reuters quotes an iron ore trader in southern China saying “The overall market sentiment is turning much better amid growing enquiries from steel mills, and iron ore prices are expected to rise further.”

Rebar futures also rose on Tuesday on hopes of a recovery in construction in China.

After hitting a high above $180 in September last year iron ore tumbled to $116 in the space of a month, but has since recovered some of the losses. This year the Chinese import price for 62% iron ore fines has hovered on either side of the $140-level and is not expected to get back to record levels any time soon.

Mining companies were dealt a body blow last week when the premier of China, a key market for iron ore as well as copper, coal, nickel, lead and zinc,  delivered a downbeat outlook for the world’s second largest economy adding that there were “new problems” to deal with. Financial markets and precious metals tanked on the news.

China will grow by 7.5% this year, Wen Jiabao said at the opening of the country’s parliamentary session adding that the economy is experiencing “downward pressure” and that “internationally, the road to global economic recovery will be tortuous, the global financial crisis is still evolving and some countries will find it hard to ease the sovereign debt crisis any time soon.”

China recorded GDP growth of 9.2% in 2011 and annual growth has averaged 10.4% since 2001, peaking in 2007 at 13%.

The last time expected growth was pegged at below 8% was 2004.