BHP, Rio and Fortescue lift as iron ore hits 2023 high

The news: Iron ore prices have hit new highs for 2023, helping lift Australia's three biggest materials miners and opening the possibility of a second consecutive federal budget surplus. The rally in the commodity's price is due in part to China scrapping a steel production cap as it tries to boost its ailing economic growth, The Financial Times reports.

The numbers: Singapore iron ore futures are trading at USD130.40 per tonne after topping USD136 overnight, breaking past the USD131 level not seen since March. The commodity's rally has helped Fortescue gain 12.8% in a month, while BHP while Rio Tinto and Fortescue have jumped 5% and 7.9% over the same period. The federal government's half-year mini-budget revealed a forecast $1.1 billion deficit, down significantly from the $13.9 billion black hole predicted in May, with help in part from the up-trending iron ore price and resilient demand from China and India.

The context: China 's economic growth has been sluggish in much of 2023 in the aftermath of pandemic lockdowns and an ongoing liquidity crisis in the property sector. Despite these challenges, demand for iron ore has remained relatively robust in the world's second-largest economy. The rising ore price however presents a problem for China's policymakers, who have been trying to slow its dependence on imports as the local steel industry struggles with higher costs and weaker demand in construction. China still imports around 70% of its iron ore from Australia.