Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton, the world's three largest iron ore exporters, may increase prices by 30 per cent next year as demand driven by steelmakers in China outpaces growth in supply. | |
| Prices for benchmark shipments from Australia will rise to a record $66.40 a tonne next year from $51.47 in 2007, according to the median forecast of eight analysts surveyed by Bloomberg. PUMPING IRON
World's three largest iron ore exporters may increase prices as China demand outpaces growth in supply
Iron ore mining companies will not be able to keep up with growth in consumption for years, so prices will rise until 2010
India, which accounts for 14 per cent of the world supply, aggravated the global shortage in March by increasing export taxes |
Sales may climb 11 per cent this year as supplies gain 8 per cent, Merrill Lynch & Co estimates. Mining companies and customers begin annual contract talks next month for shipments from April. |
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| Chinese steelmakers, the biggest consumers, are raising production by 15 per cent to meet the demand for cars, railroads and buildings. The increase will provide record profits for mining companies and may help Brazil's Vale double its earnings from iron ore by 2009, according to Citigroup research. |
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| "It's a sellers' market,'' said Peter Chilton, who helps manage the equivalent of $1.4 billion at Constellation Capital Management in Sydney. |
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| 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 per cent more this year, Goldman said. |
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| Prices may rise by more than 50 per cent 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. Vale, London-based Rio and BHP in Melbourne account for about 75 per cent of global iron-ore exports. |
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| "The market is very tight,'' Marius Kloppers, who will become the 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. |
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| 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 per cent in the past year to $590 a tonne in Antwerp, the highest since April 2005, according to Metal Bulletin. |
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| ArcelorMittal, the world's biggest steel producer, said August 1 that profit rose 50 per cent to $2.72 billion in the second quarter. Nippon Steel Corporation, its closest rival, expects to post a second annual record profit in 2007. |
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