Iron ore price-increase outlook has dimmed
Reduced steelmaking now forecast for fiscal 2009
By Tom Stundza -- Purchasing, 9/24/2008 4:01:00 PM
The six-year surge in iron ore prices may come to a dramatic slowdown in 2009 if steelmakers continue to reduce output in a slowing world economy and the global credit crisis. A Bloomberg News survey of analysts this week find a majority believing that world iron ore suppliers Vale, BHP Billiton and Rio Tinto will get “smaller-than-expected price increases next year.” The most pessimistic ones say they may trim their earlier forecasts for annual iron-ore price increases next year by 15-30%.
ArcelorMittal, the world's biggest steelmaker, already has announced it is reducing steelmaking in the U.S. and Europe in an attempt to support falling prices as growth is slowing. Also, banks are curbing new lending and companies are reining in spending plans after the collapse of mortgage markets led to $523 billion in bank losses and write- downs worldwide.
Iron ore climbed for a sixth straight year in fiscal 2008. Brazilian firm Vale, the world's largest iron-ore exporter, boosted prices by as much as 71% this year and so far has been unsuccessful in seeking to reopen contracts to get prices on par with Australia’s BHP Billiton and Rio Tinto, who scored gains of as much as 97%. Reason: World steel prices are down by almost 20% since the peak in May, according to London-based Metal Bulletin.
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