News Room - Steel Industry

Posted on 17 Mar 2009

Iron ore contract prices seen down 30-35% says miner

Iron ore benchmark contract prices are set to fall 30-35 percent from levels set last year to reflect lower demand amid the global recession, Australian miner Territory Resources Ltd said on Tuesday.

 

Territory, which is ramping up production to two million tonnes a year at its Frances Creek mine in Australia's Northern Territory, is this week meeting with key customers in China to finalise long-term sales commitments. Prices will be benchmarked against contract prices for Yandi lump and fines ore, produced at BHP Billiton and Rio Tinto mines in western Australia's Pilbara iron ore province. "We believe prices should settle somewhere between 30 and 35 percent below the agreed rates last year," said Alan Cummings, Territory's general manager finance.

 

BHP and Rio Tinto are locked in negotiations with North Asian customers over prices for ore sold under contract for the year starting April 1.

 

The negotiations are being held against a backdrop of weak demand for raw materials as world steel usage suffers its steepest decline since the end of World War Two.

 

CLSA Asia-Pacific Markets said in a research note on Tuesday it now expects contract iron ore prices to fall 30 percent this year, more than the 20 percent fall it was previously forecasting.

 

The firm said there was little incentive for iron ore producers to settle benchmark prices in a rush as there was an expectation that Chinese demand would normalise as government stimulus measures gained traction.

 

CLSA noted iron ore spot prices in China had fallen 21 percent to $67.50 per tonne from $85 per tonne in the past month as stockpiles at Chinese ports increased.

 

"In the near term we believe the risk to iron ore spot prices in China remains to the downside and that Australian iron ore producers will continue to defer settlement until there is increased demand visibility," the firm said.