iron ore prices to rise

DJ China Sees 2008 Iron Ore Prices Rising 53% On Strong Demand
12/06/2008 04:37PM AEST



HONG KONG (Dow Jones)--China's contract iron ore prices will increase as much as 53% this year due to a strong demand in the country, Zou Jian, executive director of the China Iron & Steel Association, said Thursday.

"I see China's mineral resources shortage has been more severe on the back of a strong growth in the economy," Zou told reporters on the sidelines of a conference.

Zou expects China's iron ore imports will increase to 430 million metric tons in 2008, up 12% from 383 million tons in the previous year.

The average 2008 iron ore contract price will reach US$110-US$130/ton, cost, insurance and freight, up from an average of US$85/ton, CIF in 2007, he said.

Iron ore is a key raw material in steel production.

Last year, iron ore contract prices rose 9.5%, compared with a 17% increase in the previous year and a massive 72.5% rise in 2005.

Chinese steel mills led by Baosteel Group Corp., the nation's biggest steelmaker, are finalizing the price at which they will import iron ore from Australia on an annual term contract this year.

Zou said the deadline for negotiations with Australia remains unchanged at June 30.

The talks have been held up as Australian miners want an increase of more than 80% over last year's prices.

In late February, Baosteel agreed to pay Brazil's Companhia Vale do Rio Doce (RIO), or Vale, 65%-71% more for various iron ore grades after Vale reached similar agreements with Japanese and South Korean mills.

Australia's BHP Billiton Ltd. (BHP.AU) and Rio Tinto PLC (RTP) are seeking a higher increase as the cost of shipping ore from Australia to Chinese ports is lower compared with Brazil.



-By Yvonne Lee, Dow Jones Newswires; 852-2802-7002; [email protected]



(END) Dow Jones Newswires

June 12, 2008 02:37 ET (06:37 GMT)

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