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china's iron ore demand to underpin global prices.

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    China´s iron ore demand to underpin global prices until 2007/08 - Macquarie
    Wednesday, September 14, 2005 7:21:54 AM

    OIL| BHP BILLITON LIMITED|BHP.AU|AU|6144690|AU000000BHP4| BHP BILLITON|BLT|GB|0056650|GB0000566504| RIO TINTO|RIO|GB|0718875|GB0007188757| RIO TINTO LIMITED|RIO.AU|AU|6220103|AU000000RIO1| COMPANHIA VALE DO RI|VALE3|BR|2196286|BRVALEACNOR0| 2005-09-14 08:21:54 China's iron ore demand to underpin global prices until 2007/08 - Macquarie SYDNEY (AFX) - Iron ore will continue to attract record high prices as demand from China continues to underpin a bull market, Macquarie Bank senior commodities analyst Jim Lennon said

    The analyst told a group of industry participants in Sydney that iron ore prices will likely come under pressure in 2007 and 2008 when falling steel prices and a greater supply of the bulk commodity will ease market pressures

    Lennon said this year's record jump of 71.5 pct for fine iron ore prices for the contract year starting April 1 will remain supported and further increases are possible

    He said little pressure exists on iron ore contract prices into 2006 with the spot market acting as a cushion to any unseen falls

    The analyst said some suppliers have shifted shipments to the Chinese iron ore spot market due to lower Japanese contract prices

    Since 1990, he said, the global iron ore seaborne market grew by 305 mln metric tons with China's demand accounting for 82 pct or 205 mln tons

    In recent times, China's iron ore demand has been even stronger, accounting for 93.5 pct of global iron ore seaborne supply since 2000

    Lennon predicted China's iron ore seaborne demand will grow to 480 mln tons in 2010 from an expected 269 mln tons in 2005

    Most of this is forecast to come from the "big three" suppliers -- Brazil's CVRD, BHP Billiton and Rio Tinto

    Lennon expects the dominant players in the iron ore market to increase their market share to 77 pct or 700 mln tons in 2010, from 73 pct or 481 mln tons in 2005 as they add new capacity

    The analyst said recent high iron ore prices in China have attracted temporary supply from India and Chinese iron ore mines

    Lennon said supply to China from India is limited by high transport costs, where Indian landed iron ore is around 70 usd a ton while iron ore from Australia is around 50 usd a ton

    Australia's iron ore accounts for the majority of China's needs, supplying 78.1 mln tons to China in 2004, up from 32.7 mln tons in 2000, he said

    This compared to India's exports to China of 50.2 mln tons in 2004, up from 11.0 mln tons in 2000, and Brazil's exports of 46.0 mln tons in 2004, up from 14.8 in 2000

    Lennon said there is also increasing supply of iron ore to China from non-traditional sources including Canada, Venezuela, Russia and Chile

    The supply from non-traditional sources is forecast to rise to 19.1 mln tons in 2004 from 1.6 mln tons in 2000. Meanwhile, Lennon said as the "Japanese are running chronically short of iron ore," he expects Japanese steel mills will pay significantly higher prices ahead for iron ore contracts

    He said this has already happened with Australian bulk fine iron ore prices to Japan increasing to 50.7 usd a ton on April 1, 2005, from 38.2 usd a ton a year earlier

    The analyst said the Japanese steel mill cost of hot rolled coil will climb to 195 usd a ton in 2006 from an expected 158 usd a ton in 2005, resulting in a 96 usd a ton reduction in margins for the 2005-2006 period

    [email protected] pd/blh/dg/dk For more information and to contact AFX: and

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