Iron ore prices have extended their recovery from a slump last month, but analysts say further gains may be in doubt. The price rallied 4.2 per cent to $US116.60 a tonne on Tuesday, after falling 17 per cent last month.
"What we're seeing at the moment is a bit of short covering recovery in steel prices in China and a relief rally also now occurring in iron ore," said ANZ's head of commodity research, Mark Pervan.
Shares of Australia's major miners failed to capitalise on the rally, with BHP falling 1.4 per cent to $33.79 and Rio Tinto falling 1.4 per cent to $54.36 amid a broader market sell-off. Fortescue Metals, whose shares are more sensitive to fluctuations in the iron ore price, rose 2.6 per cent to $3.55.
China's slowing growth has curbed steel demand, dragging both steel and iron ore prices to multimonth lows last week. China's biggest steelmaker, Baosteel, sees production rising just 1 to 2 per cent this year from last year's 716.5 million tonnes.
Goldman Sachs commodities analyst Christian Lelong said he remained bullish in the short term for iron ore, but less so for the longer term. "We expect prices to bottom at $US75 before stabilising in the $US80-$US85 range from 2015 onwards," he said.