Ore price rise may be curbed

A SLOWER growth in demand and rising supply could damp another major rise in the iron ore contract price in 2008, Chinese industry officials said yesterday, ahead of the start of annual talks with global miners.

However, given China's still-strong demand for the steel making raw material as well as the surging spot price of Indian ore this year, officials and traders don't expect an immediate drop in next year's term price.

The contract price, effective from April 1, had risen 71.5, 19 and 9.5 percent over each other in the past three years. Talks are between mills globally with China, the largest buyer, and the top three miners, including Brazil's CVRD. The talks on the 2008 term price are due to start late this year or early next.

"The surge (in the prices) over the past years is basically, if not totally, reflecting the supply-demand condition," said Chen Haoran, chairman of the China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters, at an industry conference.

But Chen believed that after significant jumps in the price, "there must be a huge price drop."

The growth in China's steel industry, the world's largest, has started to slow as the government acts to eliminate small, old and inefficient mills.

In addition, an increasing number of domestic ore projects which were developed earlier and are now coming onstream could boost China's self-sufficiency for ore. China has been investing more to develop ore mining, including those of very low grade that was previously untapped.

The country's ore self-sufficiency ratio dropped to around 47 percent between 2004 and 2006, but it could rebound to a 50-50 level this year, industry officials say.

Zou Jian, chairman of China Metallurgical Mines Association, expects a major drop in 2009 term price, adding the nation's increasing ore output has become the key force to limit any sharp rise in global ore prices and could challenge the top three miners' hold on controlling prices.

Zou yesterday estimated that China's iron ore imports could rise 18 percent to 386 million tons this year. He had earlier predicted a growth of 20 percent.