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Ardent Listener
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 Posted - 09/27/2007 : 16:53:07
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Iron ore prices could increase 30% in 2008
Iron ore prices could rise 30% next year
Cia Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd, the world`s three largest iron-ore exporters, may increase prices by 30% next year as demand driven by steelmakers in China outpaces growth in supply.
Prices for benchmark shipments from Australia will rise to a record US$66.40/t next year from US$51.47 in 2007, according to the median forecast of eight analysts surveyed by Bloomberg.
Sales may climb 11% this year as supplies gain 8%, Merrill Lynch & Co estimates. Mining companies and customers begin annual contract talks next month for shipments from April.
Chinese steelmakers, the biggest consumers, are raising production 15% to meet demand for cars, railroads and buildings. The increase will provide record profits for mining companies and may help Brazil`s Vale double earnings from iron ore by 2009, according to Citigroup Inc research.
"It`s a sellers` market,`` said Peter Chilton, who helps manage the equivalent of US$1.4 billion at Constellation Capital Management in Sydney.
Iron-ore mining companies won`t expand fast enough to keep up with growth in consumption for years, so prices will rise until 2010, according to Paul Gray, a commodities analyst at Goldman Sachs JBWere Pty in Melbourne. China, which buys almost half the world`s traded iron ore, may import 25% more this
year, Goldman said.
Prices may rise by more than 50% next year because of low inventories at Chinese ports and lack of supply, Merrill Lynch analysts led by Vicky Binns, said in a report yesterday.
"The market is very tight,`` Marius Kloppers, who will become chief executive officer of BHP next month, said on September 12. Tom Albanese, his counterpart at Rio Tinto, described the iron-ore market as "very, very strong,`` in a September 25 UBS AG report.
Steelmakers can afford to pay more by boosting prices for their products. Coils of hot-rolled steel, used in car bodies and washing machines, have risen 11%in the past year to US$590/t in Antwerp, the highest since April 2005. ArcelorMittal, the world`s biggest steel producer, said August 1 that profit rose 50% to US$2.72 billion in the second quarter. Nippon Steel Corp, its closest rival, expects to post a second annual record profit in 2007.
This year`s iron-ore market caught analysts at Goldman, JPMorgan Chase & Co. and UBS by surprise. Goldman and UBS said in December that prices would be little changed at best, and JPMorgan anticipated a 10% cut as recently as March.j
(Bloomberg, September 27)
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They may have to up the guards at the ore docks this spring. Ardent Listener
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Iron ore up 30% in 08?
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