Iron ore prices rose on better sentiment

Prices of imported iron ore at major Chinese ports increased.

{reg}[PAID={"id":"12,13,14","title":"The content you tried to access is only available to paid subscribers.","link":"1"}]The price of imported iron ore at major Chinese ports rose higher from a week ago, from USD 128.50 to USD 132.50 per metric ton, reports Market Realist.

Westpac's economist Justin Smirk notes that the surge came from weaker than usual increase in Chinese iron ore production, rather than an increase in demand. In April and May, lower iron ore prices have encouraged importers to ship more iron ore, which led to an increase in iron ore inventory.

In June, when iron ore prices were at their lowest and begun to rise, China's iron ore imports actually fell, while shipping rates rose. The increase in iron ore prices recently seen was rather driven by optimism, while shipping rates rose due to lower supply growth.

Iron ore prices bottomed in mid 2012 as the central bank of China announced USD 157 billion worth of stimulus to energize its falling economy. Although iron ore prices rose following the announcement, investors knew more economic stimulus was coming.

The fact that iron ore continues to trade above $100 per metric tonne suggests traders continue to expect that China will be able to prevent a financial crisis.{/reg}