shouldn't be too long now, page-7

A steal now but iron ore is set to soar

BARRY FITZGERALD

March 24, 2010 - 12:14PM

There is no doubt that iron ore prices are set to rise sharply in the year ahead. The only question now is will the increase from last year's prices be 60 per cent, 90 per cent or something like 110 per cent?

Overnight suggestions that the world's biggest producer of the steelmaking raw material, Brazil's Vale, had in fact struck a deal for a 114 per cent increase starting from April gave iron ore stocks a bit of a push along in early trade today.

But Vale spoilt the fun by coming out with an announcement that it had not reached such a settlement, or at least that it "not published any new press release to the capital markets about its product prices."

"Vale also states that the results of our marketing efforts will be publicly presented at the regular disclosure of our quarterly financial statements, in accordance with current legislation," the company said.

What it did do was confirm it had joined BHP Billiton in the push to move the global seaborne trade in iron ore from one based on annual contract price settlements to one based on short-term tonnage arrangements with prices set by reference to spot prices.

To that end, Vale said it had filed documents filed with the Brazilian Comisso de Valores Mobilirios and other regulatory bodies.

"Vale has officially informed that it recently implemented a new marketing policy, involving, among other things, a more flexible approach in relation to prices of iron ore, including the basis of sale, and this flexibility is fully applicable to markets and customers in different regions where Vale operates," the company said.

Analyst at E.L & C Baillieu, Adrian Prendergast, said that a similar rumor about Vale settling iron ore prices circulated a few weeks ago (that was for an 80 per cent increase) and also proved to be false.

"In either case spot prices are still running and were last at US$149-$150 a tonne or 140 per cent above last year's contract price of $62 per tonne! International steel prices are also getting a good kick along," Mr Prendergast said.

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