Iron ore prices hit fresh 4-1/2-month highs for a seventh straight day of gains, and offers remained firm on Thursday, reflecting firm demand from top buyer China as steel mills restart and boost stocks.
Rising prices will likely see Vale , Rio Tinto and BHP Billiton, the world’s three biggest iron ore producers, lifting contract prices for the first quarter of 2011 after cutting them by at least 10 percent in the current quarter following falls in spot prices in the previous three months.
“Big miners are trying to tighten supplies with prices showing a strong upward trend,” said an iron ore trader in Shandong province in eastern China.
“You can’t get materials from the big three miners at prices lower than $163. I think prices will continue rising for a while, although the market is taking a breather today.”
Rio and BHP are expected to report strong iron ore output for the September quarter, with both miners on track to produce record volumes for the year. Rio is due to release its report on Thursday and BHP’s is out on Oct. 20.
DOWNSIDE RISK
Offers for 63-63.5 Indian iron ore fines in China remained at $157 to $159 per tonne, C&F, on Thursday, said Chinese industry consultant, although traders said most bids start from $160 upwards.
China’s monthly iron ore imports jumped 17.9 percent in September, showing that state-set steel production cuts failed to dent demand from the world’s biggest steel market, judged by government data on Wednesday.
Iron ore prices, up almost 7 percent this month, could give up some gains in the short term, although the firm trend should be intact, analysts say.
“There’s definitely some downside risk in the near term because the market is looking reasonably well balanced,” said Graeme Train, analyst at Macquarie Securities in Shanghai.
“Six months from now, I think iron ore prices will be higher, but you can get some weakness before some strength.”
Source: Reuters
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