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iron ore rising no end in sight

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    Iron ore rising, no end in sight

    February 25, 2008
    WHEN iron ore contract prices increased 71.5 per cent in 2005, the view was that it was a one-off.

    That idea was well and truly buried last week, when the Japanese and South Koreans signed off on a 65 per cent increase, and then China's Baosteel went to water on Friday night and agreed to a similar increase with Brazil's Vale.

    Don't expect this year's rise to be the last. India's steel ministry is now asking the Government in New Delhi to impose a much steeper export duty on iron ore, a move aimed at conserving the country's resources.

    Last year India imposed a 300 rupee (about $8) duty and the Chinese buyers - who take 85 per cent of India's exports - kicked up a huge fuss.

    The Indian move underlines that iron ore availability is going to be a crucial factor in coming years. Just keep in mind that steel consumption is now running at more than 200kg for every person in the world.

    One local iron ore CEO has just done a count of listed companies with some (however minor) iron ore interest. Total: 191. Of those, about 90 have iron ore as a primary activity, he estimates.

    This is fewer than the count for uranium players but still at a level that suggests an overcrowded field. How many of them are in a position to say they will be able to get some ore aboard ship within the next two years?

    Then strip out those that have not yet resolved their infrastructure challenges. It is one thing to say you're within cooee of a BHP Billiton railway line, and quite another to get access to that line. Our volunteer statistician also came up with this number: over the past 12 months there have been 933 ASX "geological" announcements that mention iron ore, two-thirds of those being in the past six months.

    Frenzy time?

    AS Flinders Diamonds showed last week, a bit of "nearology" does no harm. The company drew attention to the fact that its Hamersley project in the Pilbara was less than 10km from the 875 million tonne resource at Caliwingina North, owned by Rio Tinto.

    Day traders duly obliged and sent the stock up on large volumes.

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