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World iron ore prices will drop by 50%

World iron ore prices in 2009 can drop by 40-50% as a result of annual negotiations between global mining and steel making companies, the Head of Analytical Dept. of “Evraz Group” Georgiy Eliseev said at the CIS metallurgical summit.

Due to global iron output drop in 2009 estimated by Mr. Eliseev as 15%, supply will exceed demand by 300 mln tons.

The world biggest mining companies such as Rio Tinto, BHP Biliton, and Vale have already started negotiations on iron ore contract prices for 2009.

As earlier reported, world iron ore prices recover by the beginning of annual negotiations between mining companies and steelmakers.

Iron ore prices in China’s spot market grew by 33%, to $ 84.5/t since October. Iron ore stockpiles in China decreased by 22% comparing with September peak figures. Shipped value increased more than twofold against inquiries growth. Iron ore import to China in December increased by 6.2%.

The analysts polled by Bloomberg agency expect iron ore prices decrease at the annual negotiations by 30% comparing with last year contracts. However, due to prices growth in spot market metallurgists may get lower discount than expected, the analysts from Liberum Capital Ltd. say. The price of Australian iron ore for instant delivery is now just by 15% lower than 2008 contract prices.

In 2008 Chinese Baosteel Group agreed to pay Rio Tinto $127/t which is by 97 % less than in 2007. It is the biggest hike in last 26 years.

Feb 14, 2009 11:18
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