Iron ore supplier sees 30% slippage in 2009 price

Fortescue exec says supply pact with China is coming soon

By Tom Stundza -- Purchasing, 4/3/2009 8:24:00 AM

Fortescue Metals Group, the world’s fourth-biggest iron ore exporter, now expects contract prices for the steelmaking raw material to drop about 30% in the fiscal year started April 1 when contracts are signed with mills in China and Japan.

Some analysts have forecast a slide of 40% or more, which is what the Chinese mills would like, since steelmakers in Asia and Europe have slashed production as the global economic slowdown has curbed demand from builders and carmakers. However, “we are expecting probably a reduction overall, looking at the spot market at the moment, of somewhere in the vicinity of say 30%,” Fortescue’s executive director, Graeme Rowley, tells Bloomberg Television in Sydney.

“The iron ore price will be set with China in the relatively near future,” Rowley says. His firm--along with the world’s three biggest producers of BHP Billiton, Vale and Rio Tinto Group--also all are involved in fiscal 2009 negotiations with Japanese and European steelmakers.

Australian brokerage Goldman Sachs JBWere is among the analysts suggesting that prices for benchmark Australian iron ore could to $55/metric ton, down from a record $91 last fiscal year. Fortescue’s estimate is more like $64/metric ton.

As previously reported on Purchasing.com, Asian steelmakers want 40% cut in iron ore prices.