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Iron-ore to stay ''''very tight'''' – Vale- 10 May 10

TORONTO (miningweekly.com) - The biggest iron-ore producer, Vale, said on Thursday the market for the steelmaking ingredient will be “very tight for the next six months”.

Ferrous Minerals executive José Carlos Martins said that global steel production was back to the record levels it was at before the collapse of Lehman Brothers, and that not many major iron ore projects would be coming on stream in the near term.

Brazil-based Vale had previously announced it was abandoning the decades-old annual benchmarking price system for its iron ore sales, favouring a quarterly pricing mechanism.

All sales for the second quarter would be in line with the company’s new system. The price would be determined by a basket average of spot prices. If the basket average doesn’t fluctuate more than 5% either way during the quarter, then prices would stay the same, Martins explained.

Spot iron ore prices have reached $176/t as Chinese demand surged, which is more than three times the $57,5/t spot prices hit in the second quarter of 2009.

Martins dismissed concerns over a property bubble in China as “nonsense”, adding that housing demand would remain strong as the country continued to urbanise. He said the greater emphasis the Chinese government was placing on growing domestic demand reduced the country’s vulnerability to fluctuations in the Western world’s economic fortunes.

Martins said China appeared to have reached capacity in its domestic iron ore production, even at these high spot price levels. And, while production was also increasing in India, that country was also rapidly growing its steel production.

TAXING ISSUE


Meanwhile, commenting on the Australian government’s new tax proposals for mining companies – which set off a firestorm of criticism from the industry – Vale FD Fabio Barbosa said they implied a “distortion” to the industry.

Martins expressed worries other countries might get ideas from Australia: “It is an undesirable solution...These kind of things make space for the same thing to happen in other countries.

Australian prime minister Kevin Rudd has defended the proposed tax changes – which would see mining companies paying a 40% corporate tax rate – saying they would only apply to profitable companies, particularly those making what he called “super profits”.

The new tax regime could be introduced from mid-2012.

May 10, 2010 09:23
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