rio's kickin' it's butt, page-9

may get iron ore price rise of 11.5% - abare BHP, Rio May Get Iron Ore Price Rise of 11.5% - Abare
12-11-05 07:19 PM EST
MELBOURNE -(Dow Jones)-

Iron ore prices may rise 11.5% next Japanese fiscal year, supported by rising global steel production led by China and constrained supply from Australia, Brazil and South Africa, Australia's chief commodities forecaster said Monday.

"Furthermore, rationalization of the Chinese steel industry is expected to result in a larger proportion of China's iron ore imports being supplied under long-term contract arrangements rather than from the spot market," the Australian Bureau of Agricultural & Resource Economics said in its December quarter bulletin.

"This is expected to result in Japanese and European steel mills settling contracts at higher prices in order to guarantee supplies," Abare said.

Iron ore miners BHP Billiton (BHP), Rio Tinto PLC (RTP) and CVRD (RIO) are currently negotiating contracts with steel mills for the Japanese fiscal year starting April 1. This fiscal year they secured an unprecedented 71.5% rise because of surging steel prices.

Australian analysts are forecasting further gains of up to 30% this year, despite steelmakers' rhetoric that falling steel prices mean they can't afford to pay more for raw materials.

Coking, or metallurgical, coal prices are expected to fall, Abare said. Hard coking coal is expected to fall 8% to US$115 a ton and semisoft coking coal is forecast to fall 30% to US$56 a ton. Pulverized coal injection coals may fall 17% to US$83 a ton, Abare said.

-By Matt Chambers, Dow Jones Newswires;