China plays a role in driving up iron ore prices
Vivek Tulpule, chief economist with Australian mining giant
Rio Tinto, said yesterday during his speech at the Forum of
Chinas Mining Industry in Beijing that the global mining industry is in the midst of an upward price trend.
While the downward trend of the US dollar and the increased investment in
iron ore trade and
production have both contributed to the rise in
iron ore prices, Tulpule explained,
China also plays a key role in driving up the prices for the
steelmaking raw material.
Tulpule indicated that
Chinas great demand for international mining resources such as
iron ore is derived from the following three reasons:
1. Investment in
China is increasing, and
Chinas rapid growth will last for several years
2.
China is now in the course of urbanization and industrialization
3.
China lacks of plenty of mining resources
Talking about the 2006
iron ore price negotiations that are underway, Tulpule said that the supply and demand relation, not the negotiations between the miners and steelmakers, would dictate how the
iron ore prices will be set in 2006. Global
iron ore demand will remain strong next year, he indicated, but supply will be short.
Tulpule suggested that the ace up the miners sleeve was Indian ore.
India is one of the main suppliers of
iron ore to
China. However, since the
iron ore trade between
China and
India has been concluded on spot basis, Indian ore prices are three times higher than those of three largest
iron ore suppliers. The miners intend to take advantage of the Indian ore price trend to push for an increase in
iron ore prices.
Sensing that Indian ore prices might limit its bargaining position,
China sent delegates from
China Iron and Steel Association (CISA) and
China Chamber of Commerce of Metals Minerals & Chemicals importers & Exporters (CCCMC) to
India prior to the current
iron ore price negotiations. The delegates hammered out a long-term trade agreement with their
India counterparts.
Tulpule downplayed the significance of the Sino-Indian pact. He said that although
India may well supply
China with a large quantity of ore next year, it still does not change the fact that global demand for
iron ore will remain strong. 2006
iron ore prices will definitely go up, he said, though the increase range is hard to predict.
SteelOrbis Shanghai