Atlas Iron Ltd., Murchison Metals Ltd. and Fortescue Metals Group Ltd. jumped in Sydney trading on optimism China, the world’s biggest consumer of iron ore, is buying more of the steelmaking raw material.

 

Atlas, producing from its Pardoo mine since October, soared 20 percent, the most in more than a month, on the Australian exchange. Murchison, part owned by U.S. hedge fund Harbinger Capital Partners, rose 17 percent.

 

India’s iron-ore exports in November doubled from the previous month as China increased purchases. China is spending 4 trillion yuan ($586 billion) to stimulate its sagging economy, raising expectations of increased metals and steel consumption.

 

“The iron-ore stocks have been overly poorly treated in the past couple of months with all the fear over China,” Michael Heffernan, a client adviser with Austock Securities Ltd., said today from Melbourne. “Negativity over the Chinese situation is overdone.”

Atlas increased to A$1.025 at the close of trading in Sydney. Murchison Metals rose to 74 cents.

 

Fortescue, Australia’s third-biggest iron ore producer, gained 4.2 percent to A$2.01. The companies are based in Perth.

 

Steel production in China’s Tangshan, Hebei province, has risen to more than 70 percent of capacity as companies resumed output after prices stabilized, the Tangshan Evening News reported Dec. 26, without citing anyone.

 

About 39 out of 57 iron and steel factories in Hebei, China’s biggest steel-producing province, are operating now, compared with 25 in August, the report said. Local financial institutions have sped up loan approvals, it said.

 

‘Whiff of Optimism’

 

“There seems to be a whiff of optimism in the market generally and the materials industry is no exception,” Austock’s Heffernan said. “The world’s not suddenly giving up the ghost and we’re not all turning into subsistence farmers, and that’s why iron ore miners are returning from the depths of despair they were in a month ago.”

 

The global recession has curbed demand for steel, prompting mills in Asia, Europe and North America to slash purchases of raw materials. Contract prices for iron ore may halve to $46 a ton next year as demand from China slumps, Australia and New Zealand Banking Group Ltd. said in November.

 

China may ask BHP Billiton Ltd., Rio Tinto Group and other suppliers to accept an 82 percent price cut after steel prices fell to 1994 levels, the China Iron and Steel Association said last month. Chinese mills are buying more from India because they want suppliers such as BHP to cut prices, said R.K. Sharma, secretary general of the Federation of Indian Mineral Industries on Dec. 26.

 

“In the past couple of months the Chinese may have been posturing to get the best possible deals they could when negotiations over contract prices reopen,” Heffernan said. (Source: Bloomberg)