iron ore could get 10 percent price rise

Iron ore exporters may be in line for 10% price rise
Email Print Normal font Large font Jesse Riseborough
June 23, 2007

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AdvertisementIRON ore exporters such as BHP Billiton and CVRD may win a 10 per cent increase in prices from steel mills next year as China drives global demand, according to Daiwa Securities.

Annual contract prices for benchmark Newman fines ore might rise to $US89.89 a tonne from $US81.72, Daiwa analyst Mark Pervan said in a report this week.

The bank had previously forecast a 5 per cent gain in the steelmaking raw material.

Iron ore prices have risen for the past five years to a record level because of surging demand from China, the biggest producer of steel and the biggest buyer of iron ore.

CVRD said last month that China's iron ore imports might exceed expectations in 2007 as the nation's rising steel output boosted demand.

"China is clearly the key market for iron-ore demand," Mr Pervan said in the report. "The spot market also points to higher contract prices in 2008."

The Indian iron ore spot price into China was trading at a record $US105, the report said.

Global iron ore prices climbed 24 per cent in the first five months of this year, according to the Federation of Indian Mineral Industries.

Daiwa said export iron ore supplies might rise 8.3 per cent in 2007, mainly from the three biggest producers - BHP Billiton, CVRD and Rio Tinto, which have about three-quarters of the global market between them.

"Despite our 2007 supply growth forecast looking nominally high, we do not expect it to match even stronger demand," Mr Pervan said. "[China's] larger and faster growing coastal mills will require an increasing amount of high grade and contract-secured iron ore from Brazil and Australia."

Prices might gain 25 per cent next year as Chinese demand rose more than expected, Credit Suisse Group said in a report this month. It had been forecasting a 10 per cent gain.

Last month Goldman Sachs JBWere forecast a 9 per cent gain and in March Deutsche Bank forecast a 10 per cent increase.

China might boost imports by as much as 20 per cent this year, the China Metallurgical Mining Enterprise Association said in April, doubling a December prediction.

Bloomberg