It’s official, iron ore has entered a bull market.
The NYMEX traded 62% Fe, CFR China index is now trading at $72.22. Since July 5 it has gone up a total of 20.4%.
A technical bull market is defined as a 20% gain.
What is behind the rising price of iron ore?
A major driving factor behind the rising price of iron ore is the announcement of major infrastructure spending in China.
China has more than quadrupled the value of fixed asset investment projects approved between July and September.
45 projects worth a total of 437.4 billion yuan ($88.9 billion) have been approved.
Many of these projects will require large amounts of steel — hence the rise in iron ore prices.
China’s growth has been slowing recently and the idea is to prop up the economy with Keynesian-style policies.
Indeed, China’s economy expanded last quarter at its slowest pace since the 2008 GFC.
The ASX stocks that stand to benefit from rising iron ore prices
All the usual suspects in the Australian iron ore game could stand to benefit from rising iron ore prices as it expands their margins.
These include BHP Billiton Ltd [ASX:BHP], Rio Tinto Ltd [ASX:RIO], South32 Ltd [ASX:S32] and Fortescue Metals Group Ltd [ASX:FMG].
However, looking further afield there are some potential options you may not have thought of.
These include Mount Gibson Iron Ltd [ASX:MGX] and Atlas Iron Ltd [ASX:AGO].
Both of these stocks have market capitalisations in the range of 600–400 million and as you can see below, Atlas Iron Ltd has had a particularly strong year:
Food for thought.
For Markets & Money