iron ore prices may surprise on upside: analys

Iron ore prices may surprise on upside: analysts

15th January 2009, 10:30 WST


Mining giants BHP Billiton and Rio Tinto may win higher annual contract iron ore prices than expected as demand rebounds in China amid the start of annual price talks.

Merrill Lynch commodities analyst Tom Price said the market had strengthened since late last year.

Things are improving, the Chinese steel mills will be keen to settle early and the iron ore producers will probably want to delay.

Baosteel Group, China’s biggest steelmaker, started talks to set annual contract prices with Rio Tinto in Shanghai this week.

Prices, which have risen the past six years to a record, may fall 30 per cent, according to a Bloomberg News survey of 11 analysts this week, trimming profits for London-based Rio and Melbourne-based BHP, the world’s No. 2 and 3 iron ore exporters.

BBY analyst John Veldhuizen, who has forecast a 30 per cent drop in prices, said it might not even be that much because the latest import data into China was extremely strong.

The market may actually be tighter than we think, he said.

Imports of iron ore into China rose 6.2 percent in December from November and steel exports gained 7.4 per cent, the first gain in four months, the Beijing based customs office said January 13.

Stockpiles of iron ore at Chinese ports also fell and some steel mills in the country have reopened following a slump in demand in the fourth quarter last year, Mr Price said.

MELBOURNE
BLOOMBERG