‘China plays a role in driving up iron ore prices’

Thursday, 17 November 2005 13:48:23 (GMT+3)   |  
       

‘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 China’s 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 China’s great demand for international mining resources such as iron ore is derived from the following three reasons: 1. Investment in China is increasing, and China’s 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

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