Iron ore prices may rise by as much as 25 percent in 2011, after seeing a decrease in the second half of 2010 on the back of weak demand from China, said Kostyantin Zhevago, CEO of Ferrexpo, one of Europe's largest iron ore pellet producers which controls the world's largest iron ore deposits.
"Even a modest growth of between 0.5 and 2.5 percent in the global economy will keep iron ore consumption at a high level, supporting very good fundamentals in terms of price," Mr. Zhevago said.
According to the Ferrexpo CEO, while prices will drop by between 10 to 20 percent over Q3 and Q4 of 2010, semi-processed pellets will still average about $140/mt in the year ending April 2011. In Q2 2010 pellet prices have increased to $145/ mt compared to $70/mt in Q1. In 2009, Ferrexpo sold pellets at about $66.3/mt, compared to $124.6/mt in 2008.
As Mr. Zhevago noted, the world's largest iron ore miners Brazil's Vale and Australia's BHP Billiton last month achieved a 90 percent iron ore price increase in contract negotiations with customers on the back of China's strong consumption of raw materials. However, at the same time, the Chinese government's efforts to cool a domestic property boom have led to a decrease in Chinese iron ore prices for immediate delivery by 23 percent from an April 21 high for the year due to concerns that steel demand will slide.