Iron Ore price to rebound
Iron Ore price to rebound, China seeks cheaper imports
RIO, VALE
A fall in iron ore prices and shipping costs means it is cheaper for Chinese steel mills to buy the material from Brazil more than 8,000 nautical miles away than to buy the lower-grade ore mined in their own back yard.
China’s iron ore output had the steepest decline in July in 4 yrs, signaling the world’s largest metals consumer is poised to boost purchases from producers such as Brazil’s Vale SA (NYSE:VALE) and Rio Tinto Group (NYSE:RIO).
Stronger demand may push iron ore higher, with the spot price set to gain as much as 41% in Q-4 after tapping a 3-yr low today.
China’s Premier Wen Jiabao is overseeing $23-B of investment in new mills to stimulate auto-making and housing, which will boost demand for iron ore and help revive the nation’s flagging economy, which grew at the slowest pace since Y 2009 in Q-2.
Ore prices may rebound as soon as next month because of declining stockpiles in China and the nation’s rising demand for construction, Vale, the world’s largest iron-ore producer, said this month.
Australian ore for immediate delivery at Chinese ports traded yesterday at about 780 Yuan ($133) a dry ton, including taxes and port storage fees, with ore from Brazil at 790 Yuan. That compares to 1,030 Yuan a dry ton of ore concentrates asked by domestic miners.
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