iron ore price to rise 18 per cent by 2009

http://www.theaustralian.news.com.au/story/0,20867,21609741-5005200,00.html

Iron ore firm for another two years
David Uren, Economics correspondent
April 24, 2007

IRON ore miners can look forward to at least another two years of price rises, as the long-term outlook for resource industry improves.
A survey of commodity analysts conducted by Access Economics shows that prices for many metals are still expected to retreat as new supplies trickle on to the market.
But the long-term outlook is improving, with the continuing growth in China expected to deliver a lasting increase in resource prices.

Lump iron ore prices are expected to be 18 per cent higher in September 2009 than they are now, with the price reaching $US105.1 a tonne.

Steaming coal is also expected to remain in tight supply, with prices 3.9 per cent higher by September 2009 than at present.

Coking coal, on the other hand, is likely to slip back from its $US115 a tonne to $US82.

Commodity forecasters have struggled to keep up with the continuing strength of resource markets.

Many believed the plunge in metals prices last May marked the turning point but, since then, base metal prices have advanced by another 9.5 per cent.

Nickel has been the stand-out, with prices rising 175 per cent, but the gains have been widespread, with only coking and steaming coal, oil and alumina suffering any slippage in the past year.

Access Economics asked the 11 commodity analysts in the survey to nominate a sustainable long-term price for the main resources.

Although they expect prices to continue falling beyond September 2009, the analysts have upgraded their estimated long-term prices over the last three months.

Although they expect nickel to lose half its extraordinary $US41,000 a tonne price tag over the next two years, they believe it will sustain a long-term price of $US17,000, 30 per cent higher than they estimated three months ago.

The long-term sustainable price of iron ore is estimated at $US67.1 a tonne, 12 per cent more than expected three months ago.

Access Economics director Chris Richardson said these revisions showed analysts were increasingly confident about the longevity of the boom.

"The longer the short term stays great, the more analysts are tempted to build better news into the longer term as well," he said.

The long-term forecast for oil has also been revised up by 7 per cent to $US65 a barrel.

In the short term, the outlook is for increased volatility, as a result of very low inventories and prices way above costs.

"For many minerals there are effectively no inventories to cater for any unexpected jump in demand (or fall in production), while any unexpected drop in demand could see prices head back towards levels rather more consistent with cost-based fundamentals," the report said.