Ground Breakers: Drinks all round as commodities end the week on a high

A slight recovery in iron ore prices, which lifted their nose back above US$90/t overnight, gold up to US$1860/oz and base metals up across the board.

It doesn’t take a lot for sentiment to shift in the mining sector.

Case in point Fortescue Metals Group (ASX:FMG), which is up more than 5% today despite seeing iron ore prices — its only saleable commodity ATM no matter what Andrew Forrest claims about its green hydrogen prospects.

That followed a sector leading rise yesterday, that has seen FMG shares climb from under $14 to more than $16 in less than 48 hours, presumably not off the pack of this 100% bonkers PR video.

All the big iron ore players are onto a winner, with Rio Tinto (ASX:RIO) up 4.59%, Champion Iron (ASX:CIA) 6.35% higher, Mineral Resources (ASX:MIN) rising 3.93% and BHP (ASX:BHP) up 3.71% after its AGM yesterday.

Gold Road Resources (ASX:GOR) was the top gold stock, up 4.05%, while copper miner 29Metals (ASX:29M) was the beneficiary of a 1.1% rise in copper metal prices to US$9811/t.

The materials index is up a rollicking 3.04%, pulling the ASX 200 to a more than 1% gain.

One factor has been Evergrande’s last minute salvation from default yesterday and a slightly less cloudy outlook for China’s teetering property market as a whole, but analysts say fundamental matters like higher than expected inflation in the US and steel mill margins have impacted gold and iron ore prices, respectively.

“Gold futures continued to rise overnight after data earlier this week showed that US CPI exceeded expectations in October,” Commbank analyst Vivek Dhar said in a note.

“The subsequent increase in US 10 year inflation expectations was likely the key driver of the lift in the precious metal. Gold is finding support on views that the Fed will keep rates low despite elevated inflation.”

Dhar said subdued steel margins suggested “low iron ore prices are likely here to stay in the short term”, although the definition of low seems to be in the eye of the beholder.

BHP CEO Mike Henry yesterday said prices remained ‘high’ despite falling 60% from out of this world records seen in early 2021.

Lower iron ore prices are set to bring a hit for the WA and Australian budgets, but for smaller iron ore miners there may be some relief in falling shipping costs, with freight cargo rates falling from US$21/t in early October to US$11/t recently, according to Dhar.