The situation in the world market for iron ore

The dominant position in the world market for iron ore is growing steadily growing China, which mainly contributed to the growth in demand for this essential commodity in the country. This is evidenced not only statistics for the period 2004 - 2006 chtg., But, more importantly, the projections for the immediate future. According to the American company "Goldman Sachs", the demand for imports of iron ore in China in 2008 - 2010 years will grow to 50 - 55 million tonnes per year.
None, however, clear as to whether the company - ore producers to supply such a large number of commodities in the period. Experts company "Goldman Sachs" have stressed that the lack of a proposal on the one hand and increased demand - on the other hand, make it more likely than 30% - rise in contract prices for iron ore in 2008, and these prices may still go on a higher level, if the growth of the so-called spot prices, ie prices for immediate shipment conditions.

Meanwhile, there has recently been a significant increase in spot prices for Indian iron ore to be supplied to China. It is not difficult to assume that this will have a significant impact on the outcome of the negotiations on prices in the award of contracts for a period of one year. According to reports, spot prices for Indian ore (63.5% Fe) in July - August g.oda at about USD 150 per ton, cif China ports, while in April, they were at a level of $ 100 But after raising the expected contract prices in 2008, the prospects for further growth are seen as more modest than because of the alleged proposal would be more closer to demand. Thus, in 2009 is not expected to increase contract prices for iron ore fines, but in 2010, in the view of analysts said the company can expect even a small decline in contract prices for raw materials because of this type of establishment of a balance between supply and demand.

Meanwhile, the Chinese manufacturers in 2007 became actively shape its iron ore reserves in anticipation of a sharp rise in prices of its contract in 2008 China's growing demand for iron ore required by the needs of rapidly growing steel industry. According to even conservative estimates, steel production in China will grow this year by 17% in 2008, growth will slow to 12%, and in 2009 it will be about 8%. But there is a perception that the forces that led to a substantial rise in prices of iron ore, is still in force; pace of development in China remain high, but if they are slow, the queue India, which is beginning to increase steel production.

It is interesting significant differences in projections Chinese experts (including those working in gosuchrezhdeniyah) and Western analysts on the extent of raising contract prices for iron ore in 2008, Chinese experts believe that it will be about 10% compared with 2007, whereas As Western experts say the increase in prices of 20 - 40% and even 50%. First, perhaps deliberately understate the expected rate of price increases in order to achieve a result acceptable to them, as well as to avoid competition with foreign markets for iron ore and steel; latest forecasts are primarily aimed at extracting the maximum possible profit.

The truth, most likely, is somewhere in between. But when western experts warn of the sharp rise in prices in 2008, they send their companies - have become clear signal to producers of excessive strengthening of a powerful expansion of Chinese companies that already in 2006, confidently took to the first place in steel exports to the markets of the European Union. Most analysts, however, unanimously agree that the world market for iron ore will be held on 2008 2009 or g. Several later.

It should be noted that Chinese importers of iron ore occurrence is very concerned about the recent sharp fluctuations in freight rates on shipping of the raw materials. Therefore, at the recent conference in Shanghai on iron ore representatives of the relevant corporations of China clearly called for a case that was more long-term contracts in order to minimize the negative impact on the business unsustainable freight market.

Chinese iron ore imports fell in June 2007, to 29.6 million t (the lowest level for the year), leading to a certain decline in freight rates for ships carrying dry g.ruzy. But when the volume of imports rose in July to 33.6 million t, freight rates have risen substantially. Recently отгрузкам freight rates for iron ore from Australia to China amounted to $ 30 more per tonne, while отгрузкам from Brazil to China - more than 60 U.S.
So far, only the largest companies, such as "Baosteel" and "Wuhan Steel" have long-term contracts. This allows them to not show concern when freight rates sharply higher. Other market participants will follow suit.

As the Congress Latin American Iron and Steel Institute vice president "CVRD" W. Wright, global imports of iron ore, buyers delivered by sea, in 2010 will increase to 980 million tons, of which China will have more than half that amount. China in 2006 imported 326 million tons of the raw material, and in 2007 - 400 million It is expected that in 2010, China will have 54% of the world demand for iron ore, while its imports to the country of 525 million t. This forecast expansion of world trade in iron ore is fully consistent with the forecast International Institute of Iron and Steel, which began production in the world will rise in 2010 to more than 1.5 billion tons, with much of the increase will occur in developing countries.
Recently, the business of international trade in iron ore, are increasingly discussing the need for a new mechanism to harmonize contract prices for this raw material. As part of these discussions, "the representative said BHP Billiton" that the company is exploring the possibility of establishing a price index for the iron ore to form a "less confrontational" approach in the negotiation of contracts g.odovyh of supply. This means that prices g.odovyh contracts may be agreed on the basis of the levels formed using the index. 'As one of the leaders of the company, such an index would help buyers and sellers reach a common viewpoint on contract prices, and would help speed up and simplify the process of negotiations on the harmonization of prices for a period of up to one g.oda, the index would work equally well as when elevated, and at reduced demand.

But many experts, representing mainly the interests of steel companies have expressed considerable doubts about the possibility of establishing a price index for iron ore. In doing so, they note that significant differences in the quality of varieties and certain types of commodities that are seriously impeding the solution of the issue. The truth is, in their view, can not be ruled out the possibility of establishing a price index for Pellets and Sinter, which are easier to sorting, although, unfortunately, the volume of supplies are insufficient to find it profitable to sell them, based on the index.

However, the steel producers generally positive attitude to the idea of creating the index for iron ore because its implementation would enable the hedging transactions for raw materials, which accounted for most of the costs associated with the production of steel.

Newsletter MEDT RF