Smelting Iron-ore prices with the economy - RIO & BBL

Northern, WI 1/15/2013 (avauncer) - Iron-ore exports are a major contributor in the Australian economy and the strength of the Chinese economy can be measured by the demand for iron ore in the country. It is one of the crucial ingredients of infrastructure projects in China. The last few weeks have seen a considerable upswing in iron-ore prices and spot prices touched the $158 per metric ton mark just last week. Banking strategists note that there is a significant bound from the $116 per metric ton level that they had reached towards the end of November 2012. They now foresee them ebbing from the levels they currently stand at.

Contrasting weather

The sudden leapfrogging of the iron ore prices has been attributed to the restocking that is being undertaken in China when the supply stratum has seen a downside. Supplies are slated to boost in the latter half of the year and the current demand from China for the ore is attributed less to the upswing in its economy and more to the fact that this price strength follows a set pattern throughout the year. It must be noted that Chinese steel and coking coal prices plummeted since July, last year. Analysts further opined that key steel component prices tend to gain ground by at least 15% over the first quarter of a calendar year after which they underperformed over the rest of the year.

Downgrading its mettle

Interestingly, considering that the iron-ore prices have risen, its producers have not gained in terms of share-prices and a few of the biggest iron-ore extractors are in the throes of being ruthlessly downgraded by analysts. In addition, even though share-price gains for iron-ore producers have not reserved pace with the iron-ore price rise, analysts have relegated a few of the ore’s leading extractors. A Manila based analyst group very recently downgraded Rio Tinto plc (ADR) (NYSE:RIO) and BHP Billiton plc (ADR) (NYSE:BBL) to neutral and the latter was also cut to fall behind from neutral by a leading American bank.

The shares of Rio Tinto plc (ADR) (NYSE:RIO) were up by 0.29% to close at $55.82

The shares of BHP Billiton plc (ADR) (NYSE:BBL) were down by 0.07% to close at $66.92