Nomura Holdings Inc said that iron ore contract prices will rise by 70% in 2010 as producers of the steelmaking ingredient seek accords pegged closer to prevailing spot prices.
Nomura analysts Mr Paul Cliff and Mr Gavin Wood wrote in a note “Recent comments from both Rio Tinto and Vale suggest that contract prices must be settled much closer to spot prices or the benchmark pricing system will not survive. The iron ore market remains one of the only major commodity markets with such a large discrepancy between spot and annual contract prices and we think convergence is inevitable.”
The bank previously predicted an increase of 40% to 50% for iron ore prices.
They also said that contract prices for coking coal, which is also used in steelmakers’ blast furnaces, will double in the next two years.