M.Stanley: 2009 Iron Ore Prices To Fall At Least 35% - Estado
29 April 2009 - 9:07PM
Dow Jones News
A Morgan Stanley report sees World iron ore prices falling at
least 35% this year, despite market expectations of a 25% drop, the
Estado news agency reported Wednesday.
"If miners want to keep their main client (China) consuming ore
they need to accept a fall of at least 35% this year," the bank
said.
According to Morgan Stanley, Brazilian mining giant Companhia
Vale do Rio Doce (RIO) and Australia's Rio Tinto (RTP) are selling
ore at a 20% discount on 2008 contracts. Also, Brazil's Companhia
Siderurgica Nacional (SID) and Australia's Fortescue Metals Group
Ltd. (FMG.AU) are giving 30% discounts to raise their market
share.
The bank also pointed out BHP (BHP) was selling large volumes on
the spot market at 42% below contract prices.
Morgan Stanley said China's steel industry fundamentals were
still weak, despite a surprising (output) rise in the first quarter
of 2009.
The bank said it continued to forecast high steel stocks in
China and falling prices for flat steel.
Morgan Stanley also forecasted an 11% rise in Companhia Vale do
Rio Doce ADRs on top of current prices in an optimistic view of the
market. In a more negative scenario it saw a 4% drop.
"In 2009, a positive scenario (for Vale) would be a 25% fall in
iron ore prices with a volume of 260 million tons," said the
bank.
However, the bank has forecast Vale output at 243 million tons
this year, rising to 273 million in 2010.
Next year, the bank said it expected a 10% cut in ore
prices.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
John.Kolodziejski@dowjones.com