iron ore spot price to recover, says young

Iron ore spot price to recover, says Young

by: Dow Jones Newswires
From: Dow Jones Newswires
October 27, 2011 12:00AM

IRON ore spot prices will rebound to trade between $US150 ($143) and $US160 a tonne in the next two months following a 23.1 per cent correction since the start of September, BC Iron managing director Mike Young says.

Prices have dropped to about $US138.50 on a cost-and-freight basis since the beginning of last month, after Chinese steel prices fell and traders dumped iron ore cargoes amid persistent fears over slowing global growth.

But Mr Young said the market would recover in the near to mid-term thanks to underlying demand from China.

"Every time you get a price correction there's always a bounce," he said outside a conference in Singapore. "I think we'll see a correction to the $US150-$US160/tonne range in the next couple of months."

The price decline has left some high-cost iron ore producers running at a loss, he noted.

"At today's prices, 5 per cent of the world market is running at more than the current price, and that can't be sustained."

He described the move lower as an overreaction that he attributed more to speculator selling than a deterioration of supply-demand fundamentals.

"The speculators are ruling the roost at the moment," he said.

BC Iron hasn't received any requests for delays for the ore produced at its operations in Western Australia and Mr Young said he was not anticipating deferrals, partly because the company prices its material on a spot basis.

"If you're selling in a backward-dated forward market then you'd have a problem."

http://www.theaustralian.com.au/business/markets/iron-ore-spot-price-to-recover-says-young/story-e6frg916-1226177710091