RE: heard this morning iron ore going up 30%Sorry, you require access to the Sydney Herald....
In short BHP in discussions with Japanese Steel Makers for 30%-50% rise in iron ore prices ....
Talk of ore price rise boosts BHP, Rio
January 18, 2005
Shares in BHP Billiton and Rio Tinto surged yesterday amid expectations that iron ore price talks with Japanese steel makers had shifted sharply in favour of producers.
BHP Billiton yesterday closed at a recent high of $15.74, up 35c or 2.3 per cent.
Rio Tinto, the world's second-biggest iron ore producer, hit its highest price since early 2002 at $41.48. It closed 95c or 2.4 per cent ahead at $41.13.
The talks over iron ore prices are continuing but speculation out of Japan last week suggested Rio Tinto was asking Nippon Steel Corp for 50 per cent increases on last year's price.
According to this speculation, Japanese steel makers were looking at rises of between between 30 and 40 per cent.
Analysts had forecast increases in global benchmark iron ore prices of between 30 and 50 per cent for the April 2005-March 2006 shipping period, compared with an increase of 18.6 per cent this year.
Shaw Stockbroking's head of resources research, John Colnan, yesterday said the market had lifted its expectations based on last week's speculation.
"At the end of the day the market's taking the view they're going to be closer to Rio's requests," Mr Shaw said.
"Rio's leading the price settlements, so if Rio settles BHP will probably settle shortly after at the same price."
BHP Billiton estimates suggest that every $US1 a tonne change in the price of iron ore has an impact of $US60 million ($79 million) on net profit after tax.
Analysts have said the price of iron ore fines is expected to rise by almost 30 per cent to $US47.50 a tonne in 2005-06.
Mr Colnan said he expected negotiations to conclude later this month, although talks could run until early March.
BHP, Rio and Brazil's Companhia Vale do Rio Doce are the world's top three iron ore miners.
BHP and Rio deal mostly with Asian companies while CVRD has the bulk of its contracts with European steel makers.
ANZ's natural resources analyst, Daniel Hynes, said China's booming demand for steel continued to drive iron ore prices up, with the balance of power in price negotiations still firmly in the hands of producers.
Mr Hynes said the world seaborne trade for iron ore was expected to remain undersupplied in 2005, ahead of some major expansions by global producers.
The tight supply of in iron ore is expected to ease in 2006 and beyond, when the planned production increases will see another 250 million tonnes of iron ore production a year hit the market.
Rio Tinto settled its 2004-05 iron ore price negotiations on January 14 last year with price increases averaging about 18.6 per cent.
In the previous year negotiations were protracted, with steel makers hanging out until May 21, more than six months after talks began.
The Nihon Keizai Shimbun newspaper last week said Japanese industry sources believed the 2004-05 price increase for 12-month contracts starting in April 2005 would be between 30 and 40 per cent.