aon set to rise

Iron Ore Spot Prices May Climb `Well Above' $200/Ton -Barclays
First Published Friday, 21 January 2011 04:03 pm - ? 2011 Dow Jones
RIO DE JANEIRO -(Dow Jones)- Spot market iron ore prices could climb to "well above" $200 a metric ton as demand strengthens for the steelmaking ingredient while supplies tighten, Barclays Capital said Friday. This would bring prices up to the all-time record levels of March 2008, during the commodities boom that occurred before the global economic crisis hit iron and steel markets.
Iron ore supply constraints are intensifying and are likely to lead to a much longer than expected period of tight markets and high prices, Barclays analysts said in a report. New iron ore capacity is coming into production only slowly and India may step up existing export bans in a move to preserve more ore supplies for local steelmakers, the analysts said.
At the same time, Chinese mills, the biggest consumers, are again increasing steel production, they said.
Spot prices for iron ore fines, the most commonly traded product, are currently $186 per ton for delivery into China, according to Barclays and two global price providers. According to London-based price provider The Steel Index, the price has increased 8.7% over the past four weeks and is close to the highest point of the last 12 months, reached in April 2010. Spot iron ore prices towered to their highest ever at more than $200 a ton in March 2008 during the commodities boom, according to The Steel Index Managing Director Steve Randall.
"Iron ore markets are expected to tighten further in the months ahead, supporting iron ore spot prices at very high levels," the Barclays analysts said.
The price rise is expected partly because of declining ore grades in China, which may have fallen to averages of 20% iron content, compared with over 60% at most Brazilian and Australian mines, making China's own iron ore production less cost-effective. In addition, India's Orissa state may shortly ban iron ore exports, following last year's ban on exports from Karnataka state, according to Barclays.
-By Diana Kinch, Dow Jones Newswires; 55 21 2586 6086; [email protected]