iron ore price set to rise 20 per cent

Another big iron ore price rise ahead: Citigroup

Paul Garvey
Thursday, 7 June 2007

ANALYSTS at Citigroup have joined the chorus of forecasters tipping another rise in the price of iron ore and coal next year, with Citigroup's latest number crunching prompting a fresh Buy call on BHP Billiton.



Citigroup said it was now anticipating a 20% increase in contract iron ore prices for 2008-09, as well as respective 13% and 10% increases in thermal and coking coal contracts.

Citigroup's call follows last week's forecast from Goldman Sachs JBWere of a 9% increase in iron ore prices.

Another increase in the price of iron ore would mark the commodity's sixth consecutive year of increases. The price of iron ore rose 10% for 2003 deliveries, 18.6% for 2004, 71.5% for 2005, and 19% for 2006.

Citigroup said the tension in iron ore and coal markets was "acute" due to booming demand and supply constraints.

While strength in major commodity currencies was depressing the impact of the price increases on producers, Citigroup said it expected the depressed revenues to be clawed back next year