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Piles of iron ore at Cape Lambert, Pilbara. Source: Rio Tinto

Iron ore prices have continued their upward trajectory, reaching more than $US103 ($150) per tonne and remaining above $US100 nearly every day since Vale flagged mine disruption risks.

Vale suspended its mining operations at the Itabira mining complex in Brazil earlier this month due to government intervention off the back of rising cases of COVID-19.

These prices are a jump from April’s monthly average of $US83.40 per metric tonne and the first time they have broken $US100 since last August.

S&P Global Platts labelled iron ore as “the standout commodity”, with demand for the commodity proving to be “extremely resilient” this year.

This was credited to China’s strong crude steel production, supply shortages and lower iron ore stocks at Chinese ports.

S&P stated that data from National Bureau of Statistics had shown that China produced a record 92.7 million tonnes of crude steel last month, up 4.2 per cent on the year.

“Most analysts had predicted that benchmark 62% per cent Fe iron ore prices would fall to around $70 (per tonne) CFR this year on the basis there was plenty of supply coming from Australia and Brazil,” S&P stated.

“Demand from Chinese steelmakers was expected to pick up as economic activity resumed after coronavirus-related lockdowns, even though steel production growth appeared to be outpacing demand growth and steel inventories were more than double usual levels.

“Some participants thought this would result in a slowdown of steel production. But so far this hasn’t happened.”

Australia has been China’s number one exporter of iron ore and concentrates, with exports climbing to more than 60 million tonnes in April.

S&P predicted that the remaining of 2020 would retain a high demand for iron ore due to pent-up demand and Chinese government stimulus.

But the analyst expected iron ore prices to be significantly impacted by tighter than expected supply and operational issues at mines and ports in Australia and Brazil.

Investment bank, UBS begged to differ, raising this year’s price prediction to $US91 per ton due to the under-delivery by Brazil.

It also cautioned against the sustainability of $US100 per tonne pricing in the long term.

UBS forecasted prices to retract from their elevated level and settle at $US80 per ton in 2021.