Citigroup: iron core prices to jump 30% on strong Chinese demand

Iron core prices will jump 30% in the next two years on strong demand from China, accounting for approximately 90% of the global total, market sources quoted Citigroup as saying.

Analyst with Citigroup disclosed that it is an inevitable fact that the world will face shortage of iron ore in 2008 and 2009, which will lead to the projected price increases and remain high for the next two years.

Additionally, companhia Vale do Rio Doce (Vale), the world's largest iron ore producer, concluded the iron ore price negotiations for 2008 with Nippon Steel Corporation (NSC), the largest Japanese steelmaker, and POSCO, the largest Korean steelmaker on Feb. 18, 2008. The conclusion indicates that iron core prices will continue to increase for six consecutive years.

As an outcome of these negotiations, the iron ore prices for Southern System fines (SSF), FOB Tubarão, increased by 65% relatively to 2007. At the same time, due to its recognized superior quality, it was agreed that the price for Carajás iron ore fines (SFCJ) will have a premium of US$ 0.0619 per dry metric ton Fe unit over the 2008 price for SSF.