Iron ore gains on China demand hopes Iron ore prices continued their recovery as Chinese traders were encouraged by the rebound in domestic steel prices on hopes of a demand boost from the government's planned infrastructure projects. Benchmark iron ore for material containing 62 per cent iron delivered in China jumped 4.7 per cent to $111 a tonne. The benchmark price has recovered 25 per cent since hitting a three-month low of $88.50 at the start of September. The Chinese government's announcement that it had approved $158bn worth of infrastructure projects as well as the US Federal Reserve's "quantitative-easing" decision had also prompted buying, analysts said. "It's a big turning point in sentiment rather than a turning point in demand," said Colin Hamilton, commodities analyst at Macquarie in London. He added that although US monetary easing had limited the direct impact on Chinese demand for steel and iron ore, traders were looking at periods in the past, when QE had spurred global growth. Leading mining groups including BHP Billiton, Rio Tinto and Vale are large producers of the commodity, and the fall in iron-ore prices has raised concerns about miners" profits. For example, BHP, the world's biggest miner by market value, has responded to the price falls by shelving ­multibillion-dollar expansion plans and closing operations. Despite the recent recovery in iron ore prices, traders and analysts remain cautious about the commodity's outlook. Although the cost of production for the smaller Chinese iron ore makers are estimated to be at about $120 a tonne, there are concerns that subsidies from local governments are keeping many of them from shutting down, hence preventing a further price recovery. Jake Greenberg at Jefferies in London said: "So long as China is willing to subsidise the industry, I would not be surprised to see iron ore trade in a range between $100 per tonne and $120 per tonne. The continued sluggishness in the price for coking coal, which is also used to make steel, is a source of concern for investors. This "suggests that real underlying demand for steelmaking raw materials has not recovered and that the pick-up in iron ore may be a function of traders rather than consumers," said Mr Greenberg.