Spot Iron Ore Prices May Have Reached Bottom, Macquarie Says Email | Print | A A A
By Alistair Holloway
Nov. 25 (Bloomberg) -- Spot iron ore prices that have declined at least 65 percent from a record this year may not fall much further as producers cut output on slowing global growth, Macquarie Bank Group Ltd. said.
Benchmark prices in China, the world’s biggest user of the steelmaking raw material, slid to $70.50 a metric ton in the week ended Nov. 21 from $200 in February, a record for Metal Bulletin data going back to March 2005 on Bloomberg. The prices will be a yardstick in contract talks between producers and Asian clients. Those deals typically run from April 1.
“We’re near the bottom in the near-run” for spot prices, Jim Lennon, a London-based Macquarie analyst, said by phone today. With the output cuts, “the market could start to stabilize over the next three or four months.”
Vale do Rio Doce, the biggest iron ore producer, and BHP Billiton Ltd., the biggest miner, said on Nov. 22 they will cut output of iron-ore pellets from their Samarco venture in Brazil by 65 percent. Rival Rio Tinto Group said this month that annual iron-ore output will be 10 percent below forecast due to weaker demand. The announcements come as economies, including the U.S. and U.K., contract and demand for cars and construction drops.
Benchmark Australian iron ore prices will decline to $115.70 a ton next year from $144.70 in 2008, Macquarie’s Lennon forecast in a report on Nov. 17. He’d previously estimated no change. A further cut is possible, he said today.
“If the spot price stayed where it is today, there would be a compelling argument for a 30-40 percent cut” in the 2009 forecast compared with the 2008 price, Lennon said.
To contact the reporters on this story: Alistair Holloway in London at [email protected]
Last Updated: November 25, 2008 12:00 EST
AGO Price at posting:
64.0¢ Sentiment: LT Buy Disclosure: Held
