Reuters reported that iron ore contract prices are expected to jump to a record USD 165 per tonne in the second quarter, reflecting soaring spot prices buoyed by tight supplies and robust demand from top importer China.
The projected second quarter price for Australian fines with 62% iron content, free on board, represents the median in a poll of 10 analysts. It would mark a 17% rise from January to March 2010 period and the biggest contract price since the industry shifted to quarterly pricing in April 2010 after ditching a 40 year old annual system.
Contract prices are forecast to peak in April to June 2011 period before easing over the following quarters as global supplies recover, the poll showed. For the year, contract prices are seen climbing 25% to USD 153 a tonne.
Mr Mark Pervan, senior commodity analyst at Australia and New Zealand Bank, said that increased global steel output, firm Chinese demand and tight supplies should boost iron ore prices this year. He added that "There's a lot of dynamics suggesting there's probably more upside risks to prices than downside risks. There is supply coming online but we're still maybe one to two years away from some of the larger expansion coming through."
Spot iron ore prices have rallied since the start of 2011, pushing key indexes to record levels above USD 180 per tonne and pointing to higher contract rates for the second quarter.
Mr Colin Liang, analyst at Bank of America Merrill Lynch in Hong Kong, who expects contract prices to drop 8% next year from 2011, said that iron ore prices may peak this year and fall from 2012 as new supply comes into the market on average.
Analysts said that global seaborne supply of the key steelmaking component has been increasing by 20 million to 40 million tonnes in recent years, but production expansion plans by global miners Vale, Rio Tinto and BHP Billiton could boost annual supply by around 100 million tonnes starting 2012.
Following are the estimates for quarterly contract for Australian iron ore fines with 62% iron content in US dollars per tonne free on board, followed by the average forecasts for 2011 versus 2010.
(Source: www.steelguru.com )