strong iron ore market to stay

With market commentators predicting Iron Ore price to potentially rise sharply later this year supported by stronger demand, smaller players like FRS IMO should contunue to prosper as they gain momentum towards production.

Below is some commentary from RIO's Albanese and check out & re-read some of the figures he is citing ....

Jan. 25,2008 (Bloomberg)

Rio Tinto Group, fending off a $114 billion hostile offer from rival mining company BHP Billiton Ltd., said an ``extremely strong'' iron ore market will last, and there's no slowdown in Chinese demand for commodities.

``We still continue to see a strong market in China for all that we sell, and we don't see any signs of that changing,'' Chief Executive Officer Tom Albanese said in an interview in Beijing today. He also reiterated Rio's rejection of BHP's previous three-for-one stock bid.

China's economy expanded more than 11 percent for the fourth straight quarter, supporting global growth and demand for iron ore, copper and aluminum as a recession looms in the U.S. Albanese is visiting China as iron ore producers are in talks with steelmakers to settle annual contract prices, which may rise 70 percent, Credit Suisse Group said this month.

``In our view, if there was a possible recession in the U.S. it will only have about 1 percent impact on Chinese GDP,'' Albanese said after visiting Chinese clients and officials. ``We continue to see strong market conditions and prices.''

Rio rose 171 pence, or 3.8 percent, to 4,690 pence in London at 10:52 a.m. local time. The U.K. benchmark FTSE 100 Index rose 0.9 percent.

Rejects BHP

BHP's Chief Executive Officer Marius Kloppers met Chinese steelmakers in November to seek their backing for a bid that would create a company controlling a third of global iron-ore trade, curbing the bargaining power of Chinese mills.

Albanese is pushing a growth plan that could treble production of iron ore, used in steelmaking, to more than 600 million metric tons a year to fight off Melbourne-based BHP's unsolicited offer. He also plans to raise dividends by 30 percent and sell as much as $30 billion of assets.

BHP, the world's largest mining company, has until Feb. 6 to make a formal proposal, after an earlier bid in November was rejected, according to the U.K. Takeover Panel. London-based Rio is the world's third-largest mining company.

``We said that the three-for-one proposal by BHP Billiton was nowhere near the value we see in Rio,'' Albanese said today. ``We are as comfortable saying that now, as I was comfortable saying that then.''

Cash Sales

To benefit from rising demand for iron ore, Rio plans to triple sales in the cash market, where the price is double annual contract prices. It may exercise a clause in contracts with steelmakers allowing it to sell only 90 percent of previously- agreed volume of iron ore at fixed annual prices, the company said Jan. 17.

``In this very strong steel and iron ore market, and as we continue to expand our iron ore business, we intend to increase the amount of iron ore that we would sell to spot, in addition to maintaining a strong position in benchmark markets,'' Albanese said today.

The plan to cut contracted supply is opposed by Chinese steelmakers, the largest buyers of iron ore, the China Iron and Steel Association said Jan. 18.

``For 2008, we are planning to increase our sales of iron ore on spot within the terms of our contractual relationship,'' Albanese said. Rio doesn't plan to stop selling iron ore by long- term contracts, he said.

Rio's China sales accounted for 16 percent of total revenue in 2006, according to Albanese. He expects the proportion to have grown last year, and to gain again this year.