Friday, January 09, 2009
China Seeks Early Ore Accord Before Demand Rises, Westpac Says
Friday, 09 January 2009
Chinese steel mills want an early conclusion of iron ore contract price talks with suppliers such as Rio Tinto Group before demand increases because of a government- driven expansion program, said Westpac Banking Corp. “A significant Chinese infrastructure program is in the pipeline,” Justin Smirk, a senior economist at the Sydney-based bank, said today in a report. “This may explain why Chinese prices are firming and why Chinese steel producers are keen for an early contract settlement.”
China, the world’s biggest consumer of steel, has planned 4 trillion yuan ($585 billion) of spending on housing, roads, railways and airports. Iron ore has risen 24 percent since Oct. 31 when it reached the lowest in three years, according to data compiled by industry publication Metal Bulletin.
“The global outlook was deteriorating through October, November and December and yet Chinese iron ore prices were actually firm,” said Westpac’s Smirk. “This suggests it is domestic, rather than global factors driving Chinese ore prices.”
Westpac, Australia’s biggest lender by market value, maintained its forecast for a 30 percent decline in contract prices for the year beginning April 1 for producers including BHP Billiton Ltd. and Rio Tinto. Prices may drop 20 percent to about $73 a ton for benchmark Australian ore according to Merrill Lynch & Co. Australia and New Zealand Banking Group Ltd. has forecast a 50 percent slide.
As adapted from Bloomberg
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