By Debarati Roy/ Bloomberg
Mumbai: The benchmark price of iron ore, a steelmaking raw material, may rise next year because of demand from China, making it the sixth straight annual increase, said Sinosteel Crop.
The price may rise 5% next year, said Hongsen Wang, managing director of the company’s Indian unit said in an interview in New Delhi on 22 May. Sinosteel is China’s second-biggest iron ore trader and buys about 10 million tonne from India annually.
Rising demand from China, spurred by the world’s fastest pace of economic expansion, has pushed iron ore prices to a record for five years. Rio Tinto Group, the world’s second- largest supplier of the raw material, plans to raise annual output to 300 million tonne, chief executive officer Leigh Clifford said last month.
“China will continue to dominate the global iron ore market,” Wang said. Baosteel Group Corp., the nation’s biggest producer, said last month it will almost double annual ore purchases by 2012 as it increases capacity. About 80% of China’s steel is made in blast furnaces, which use the iron ore. The country overtook Japan as the world’s largest buyer of ore in 2003.
The iron ore price from Rio rose 9.5% to $51.47 a tonne this year, according to Bloomberg’s calculation. Prices may rise 10% next year and 5% in 2009, RBC Capital Markets said on 23 April. The bank had earlier forecast a 25% and 20% fall respectively.
Most analysts had been predicting iron ore prices would either fall or stay unchanged in 2008, expecting miners to catch up with demand. That’s changed in the past two months amid signs China’s demand may be greater than expected.
Goldman Sachs JBWere Pty, Deutsche Bank AG, and UBS AG in the past month also raised their iron ore price forecasts for next year. Goldman expects iron ore to gain 5%, instead of a 10% fall. Deutsche Bank expects the commodity to rise 10%, instead of a 5% decline. UBS expects a 10% gain, up from unchanged.