iron ore/steel prices: 65% more than in 2007

Sydney - Monday - February 22: (RWE Aust Business News) -
Consumers will pay as iron ore price rise hits cost of steel. The price
of cars, refrigerators and buildings will rise this year after
steelmakers agreed a dramatic increase in the price of their raw
materials.
The latest round of iron ore price negotiations produced its
first agreement yesterday when Vale, the Brazilian miner, said that it
would sell to Japanese and South Korean steelmakers for at least 65 per
cent more than in 2007.
Other metals, such as copper, have their prices determined daily
on the London Metal Exchange, but iron ore supply is controlled so
tightly that the miners are able to negotiate prices with the biggest
consumers only once a year.
Soaring steel demand, particularly from China, which is
undergoing a construction boom driven by its soaring economic growth, and
constrained supply from Brazil and Australia, the leading producers, has
led to this year's big increase in the price of iron ore.
Its Itabira fine ore will increase in price by 65 per cent to
$78.89 per tonne, while higher-grade ores will rise in price by 71 per
cent.
The price of iron ore is rising so fast that Rio and BHP want to
break away from the rigid benchmarking system of previous years and sell
more ore at spot prices, a market that barely existed a few years ago.

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Interfax-China reported that steel product prices rose steadily
for around two months from October 2009 and the price of imported iron
ore increased accordingly.
The average reference CIF price for iron ore jumped from less
than CNY 700 per ton to over CNY 1,000 per tonne during the period while
the average reference CIF price for Indian iron ore grading 63.5% hit a
high of USD 135 per tonne.
As a result, a number of international research institutes
modified their original forecasts that the 2010 long-term contracted iron
ore benchmark price, between the three iron ore giants and Chinese steel
mills, would rise by more than 20% from the 2009 price agreed with
Japanese steel mills.
As a result, the falling steel product prices brought down the
spot Indian iron ore price which stands at less than USD 130 per tonne at
present, still
higher than the price of domestically produced iron ore.
As the price of imported iron ore is higher than domestically produced
iron ore, domestic iron ore miners are likely to ramp up production which
will alleviate China's iron ore supply shortage this year.
Overall Chinese iron ore miners will expand annual production by
30 million tonnes to 40 millions tonnes while Chinese steel mills will
try to diversify their overseas iron ore suppliers in order to reduce
dependence on the global iron ore giants.

Reuters.