Iron ore prices set to rise 50%.
Iron ore prices seem to be going the coking coal way. Thanks to a surge in Chinese demand, rates are likely to remain buoyant. Some analysts expect long-term global benchmark prices in 2010 to be higher by up to 50% from last year. A recent Macquire report said Australia"s total iron ore exports shot up at the end of 2009, with China taking the major share. ?In 2009, Australian iron ore exports shot up 17% to 383 mt. Of this, around 282 mt was exported to China, up 46% from the previous year,? the report said.
China"s iron ore imports rose 22% month-on-month in December to 62 mt, taking total imports for 2009 to 628 mt (42% year-on-year rise).
According to Sanjay Jain,analyst, Motilal Oswal, ?Spot iron ore prices for 63.5% Fe material rose sharply last week to $133-137/tonne. Iron ore prices are likely to remain strong given the continued demand from China and consolidation of suppliers?.
?Long-term benchmark contract prices are expected to be 20-40% higher than last year,? the report said.
DSP Merrill Lynch analyst Bhaskar Basu is even more bullish on ore prices. He expects rates to be 50% higher in the new year.
?Our bullish view on iron ore is based on 1) tight supply and demand balance, 2) higher spot prices (now at an 80% premium to benchmark), and 3) faster than expected steel market recovery,? the analyst said in a recent report.
Macquire, however, expects that Chinese domestic mines will reopen after a harsh winter and it forecasts a 28% year-on-year rise in domestic production in 2010. But spot prices may go up higher if China"s severe winter delays restart of mines.
?For this reason, we see limited downside in iron ore spot prices even after the restarts commence,? the report stated.
In India, if prices are on the upside, it could mean better earnings for companies like Sesa Goa, which has rich iron ore reserves of 310 million tonnes in the states of Goa, Karnataka and Orissa.
Rana Som, chairman and managing director, NMDC, the largest iron ore supplier, however, said, ?It is very difficult to predict iron ore prices, which depends on a host of factors. While global majors like BHP and Rio Tinto have the bargaining power, Chinese and Japanese are large markets.. All of these together influence price movements?.
An analyst with a leading consultant said on the condition of anonymity, ?Indian iron ore prices can be firmer by 15% or so. With Indian steel industry showing signs of firm demand, the scope of growth is high.
Even on the coking coal front, huge increase of global Chinese imports of coking coal particularly from Australia has resulted in a spurt in coking coal prices in recent times.