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DJ Newswires 7:40am
Global spot prices for iron ore are set to reach an all-time average high in 2011, beating the previous record set in 2008, during the last commodities boom, a global price provider said Tuesday.

Market expectations are that the average annual spot market price this year will rise to $153 to $154 a metric ton of iron ore fines with 62% iron content, delivered to China, from $146.70 in 2010, said a London-based reference price supplier. The expected 2011 average will exceed the average of just below $150 a ton in 2008, according to Randall. While spot iron ore prices towered to their highest ever at more than $200 a ton in March 2008 during the commodities boom, the 2008 average was brought down by lower prices later that year after the global financial crisis hit.

"The key factors for this year are higher steel output and steel prices," said Randall in an interview. "Steel production in China will be stronger for the next few months. Steelmakers in the rest of the world are still recovering from the crisis, they're not yet back to their 2007-8 levels. In the U.S. mills are now putting up their steel prices like crazy."

According to the Brussels-based World Steel Association, global crude steel output rose 5.1% in Nov. to 114 million tons, from the year before, but was still below historical levels, indicating further output recovery is on the way. Global steel demand is expected to improve by 5% in 2011.
Iron ore supply hasn't yet responded to higher demand levels, which could put upward pressure on iron ore prices, Randall said.
"New iron production capacity will come on stream only at the end of 2011, in both Brazil and Australia," he said.
In addition, India's continued ban on iron ore exports from Karnataka state, designed to preserve supplies for domestic steelmakers, has also pressured supplies,
according to the price provider. Brazil, Australia and India are the world's three biggest iron ore exporting nations.

Spot iron prices rose 90 cents Tuesday to $171 a ton, making for a $6 increase in the past month, according to The Steel Index.