Bloomberg reported that Mr Dariusz Kowalczyk Hong Kong based senior economist and strategist at Credit Agricole CIB talks about the outlook for People's Bank of China monetary policy and the nation's economic growth.

He said that the rally, which will bolster earnings at producers including BHP Billiton Limited may be short lived as banks from Citigroup Inc to UBS AG forecast that prices will drop as miners ramp up supply. Morgan Stanley predicts a return to a global surplus in 2014, the first since 2010. Ore delivered to the Chinese port city entered a bear market in May on concern slowing growth in the world’s biggest buyer would curb demand.

Mr Michele della Vigna MD of natural resources equity research at Goldman Sachs Group Inc said that “China’s steel production has been stronger than expected in the H1 of the year at a time when the big iron ore supply increase has not come through yet. Over the coming 12 to 18 months, there’s a huge amount of iron ore production coming on stream that is likely to turn the market into oversupply.”

According to Beijing Antaike Information Development Company, stockpiles at Chinese ports rebounded from 66.26 million tonnes on March 8, the lowest since March 2009 to 71.67 million tons on July 12. Port holdings climbed 5.1% in the Q2 the biggest three month gain in two years.

China’s Production;

The National Bureau of Statistics said recently that China’s H1 crude steel output rose 7.4% to 390 million tonnes. Ore imports rose 5.1% to 384.3 million tonnes in the H1 from a year earlier. Exports from Australia’s Port Hedland, the world’s biggest bulk terminal hit a record in May with China’s purchases at an all time high.

Credit Suisse Group AG analysts led by Ric Deverell said that “The drivers behind the extension of iron ore’s short-covering rally are, we believe, idiosyncratic rather than representative of underlying strength. Short covering refers to investors reversing bets on losses. We maintain our view that bearish fundamentals will reassert themselves through the H2.

Seaborne Supply;

UBS said that global seaborne supply may increase 6% this year and 15% next year, driven by increases from Rio Tinto Group and Fortescue Metals Group Limited. The bank forecasts that prices may drop as low as USD 70 this quarter. That would be the lowest level since June 2009.

Citigroup forecasts that prices will average USD 115 per tonne this half, while Macquarie Group Limited expects an average of USD 120. In the first 6 months ore averaged USD 136.97.

Australia & New Zealand Banking Group Limited said that the Q3 tends to be seasonally weak for iron ore demand. A repeat of the slump last September, when ore fell to a three year low of USD 86.70, is unlikely this year amid low inventories at steel mills and ports in China, according to Morgan Stanley. Prices will average USD 128 per tonne this quarter and USD 125 in the final three months, it says.

Australia, Brazil;

Rio Tinto said that Q2 iron ore production rose 7% to 51.8 million tonnes from a year earlier. The expansion of its Australian operations to 290 million tonnes of annual capacity is on track to start this quarter. BHP, the world’s biggest mining company said that its Q4 iron ore production gained 17% pushing annual output to a 13th straight record.