girl181"THE chief executive of iron ore miner London Mining...

girl181

"THE chief executive of iron ore miner London Mining expects prices to remain high until 2015 as supply fails to keep pace with burgeoning demand from China.

Over "the next five years, expectations are for prices to remain high," Graeme Hossie told Dow Jones Newswires in an interview.

"Supply is not being added as fast as the industry thought it would be added" and China's rapid rate of urbanisation continues to drive robust demand for iron ore.

Iron ore is one of the key ingredients used in steelmaking and spot prices for iron ore delivered into China have been hovering at $US170-$US180 a tonne, despite current uncertainty about the global macro-economic environment.

Mr Hossie said iron ore is likely to remain above $US150/tonne over the next four years, on average, and said consensus views that iron ore would average at least $US100/tonne during the remainder of the decade were "very fair".
He cited several key reasons for why iron ore prices should remain well supported until 2015.

Firstly, China is the world's largest steel producer and is still undergoing a rapid pace of urbanisation.

Secondly, China is the world's highest cost iron ore producer and needs high iron ore prices in order to encourage more domestic production make up for any supply shortfalls from abroad.

Mr Hossie said iron ore prices have to remain above $US150/tonne in order to encourage higher amounts of Chinese ore mining from deposits with very low ferrous content. In other words, Chinese producers have to mine more ore in order to extract declining amounts of ferrous content.

Mr Hossie added that iron ore producers may struggle to find the billions of dollars needed to develop projects if there is economic uncertainty. Other market participants have said iron ore producers also face higher costs because projects are now located in more remote locations that require higher levels of infrastructure investment.

Iron ore producers also face more stringent mining and environmental review processes which can sometimes delay project development schedules, Mr Hossie said.

The year 2015 is often cited as a key reference point in the iron ore market because market participants have trouble forecasting prices beyond a five year period. He said that personally he doesn't expect global supply and demand will balance by then, Mr Hossie said.

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