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From the Australian.

IRON ore giants Rio Tinto and BHP Billiton might be battling infrastructure bottlenecks and train derailments as they race to ramp up production, but at least their trains aren't being stopped by angry, landless peasants.

Carajas mine, located in Brazil's northern Amazon state of Para.
In Brazil, rival iron ore giant CVRD has had its major Carajas railroad cut by about 200 peasants who have invaded the tracks and thrown stones at trains as they agitate for agrarian reforms.

The protesters are part of the Movement of Landless Rural Workers whose slogan is "in defence of agrarian reform and against imperialism".

CVRD is now seeking to have police remove the protesters as soon as possible. But on the flipside, any production delays will only stoke an already hot spot market for iron ore and strengthen the hand of producers at upcoming pricing talks with Chinese and Japanese steelmills.

Price negotiators will be circling each other at the Japan-Australia business conference in Tokyo with BHP Iron Ore boss Ian Ashby and Rio's head of iron ore marketing, Sam Walsh, both expected to be in attendance.

Macquarie Equities is forecasting a global shortfall in seaborne iron ore exports this year of about 30 million tonnes, compared with the industry's original expectations. It noted CVRD's operations had already been hit by rain delays and maintenance shutdowns that will likely see it ship, at the most, 287 million tonnes in 2007 - down from CVRD's target of 300 million tonnes.

Rio has stockpiled about 4.6 million tonnes of iron ore at its West Australian operations as it battles bottlenecks.

"This represents some $US230 million ($257 million) of iron ore that is currently not in the market, which can only strengthen the market tightness, and bodes well for a strong contract price increase, particularly as we are on the eve of the contract negotiation season," JP Morgan said in a research note yesterday.

The stock build is the result of a car dumper at Cape Lambert port being shut for maintenance for 14 days, and Rio's move to restructure its stockpiles for its new Pilbara blend iron ore.

Rio disappointed the market on Wednesday with lower-than-expected production numbers in the wake of two train derailments, and the market focus is now on BHP Billiton's quarterly numbers, due out on Tuesday.

But earnings downgrades on Rio were minimal at around just 1 to 2 per cent, given continued strength in commodity prices.

A key positive was that Rio remained on track with its planned iron ore expansions.

"This puts Rio in a good position to benefit from a buoyant iron ore market, although the cost pressures look set to continue," ABN AMRO said.

Rio shares yesterday bounced back, gaining $2.83, or 2.6 per cent, to $112.83.

Macquarie Bank is forecasting a massive 50 per cent rise in benchmark iron ore prices for the coming year, compared with consensus expectations for a still hefty 25-35 per cent rise.