valuation, page-2

I read an article somewhere yesterday that the 2010 benchmark price may even be 40% higher. Anyway, the reuters article shows the important trend of global tightness of IO supply as India hogs ore for it's own steel industry.

http://in.reuters.com/article/businessNews/idINIndia-45059920091230

SINGAPORE/BEIJING (Reuters) - India's 5 percent iron ore export tax hike may further tempt Chinese buyers back into a loveless annual relationship with the big three miners, in preference to the uncertain supply and volatile prices of the spot market.

Smarting after losing the battle to win bigger cuts in 2009 contracts than Asian rivals, China will now face even more pressure to accede to miners' demand for a hefty increase in 2010 contract prices, as spot prices rise to record levels and output in the world's top steel producer continues to surge.

Analysts have been steadily upping their forecasts for a rise in settlements between Chinese mills and miners BHP Billiton, Rio Tinto and Vale to around 20 percent, but there are already indications that an eventual settlement may be higher.

"Our figures show that market tightness will actually increase over the next two years, particularly for seaborne material, so an early resolution to the benchmark prices will be an advantage to iron ore buyers," said Cameron Hunt, director of the Metal Bulletin Iron Ore Index in London.

India, which supplies nearly a fifth of China's iron ore imports, lifted the duty on iron ore fines to 5 percent from zero, while iron ore lumps faced a 10 percent duty from Dec. 24, up from 5 percent.

The news helped lift the Steel Index's iron ore benchmark to a lifetime high of $112.10 a tonnes, while deals for 63.5 percent Indian fines in China were done at a record $119-121 a tonne on Tuesday, according to Chinese consultancy Mysteel.

This is about 50 percent higher than contract prices agreed for this year between miners and Japanese and Korean mills.

"The impact is massive and it is affecting prices in the whole industry. The Indians will have their cake and eat it because they can pass the costs entirely onto Chinese customers," a trader in Shanghai said.