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Thursday, February 23, 2012

Iron ore price to stay soft

Thursday, 23 February 2012

The record iron ore prices seen in 2011 are unlikely to be matched over the next six months, according to Pilbara exporters.Despite topping $US180 a tonne last year, the benchmark iron ore price has traded around $US140 a tonne in recent months, and BC Iron spokesman Morgan Ball said it was likely to stay there until midyear at least.''We are anticipating it will stay around that over the next six months,'' he said.

BC Iron is a junior exporter but is closely linked to Fortescue Metals Group through its 50-50 Nullagine joint venture, and Fortescue takes responsibility for selling BC Iron's product. Mr Ball's sentiments were matched by Sam Walsh, the boss of Australia's biggest iron ore exporter Rio Tinto.

Mr Walsh said there was still an ''element of softness'' in the iron price and the performance of the Chinese steel mills that buy most of Australia's ore. ''We believe we will go through a period of uncertainty probably in the first six months of this year, with volatility, but then we see some smoother sailing after that,'' he said. Mr Walsh said it was too early to know if the global iron ore price would be affected by a new tax imposed by the Chinese government on its domestic iron ore producers.

Reports on Friday suggested that China would raise its standard levy on Chinese iron ore producers from 60 per cent to 80 per cent in a bid to hamper marginal producers of the commodity. Mr Walsh said the move appeared to be aimed at reining in small Chinese producers of dubious environmental credentials and he did not believe it would dramatically affect the big Australian producers.
''I'm not expecting a huge impact, but time will tell,'' he said.

''It's an interesting development, a lot of people worry about whether China gets the message in relation to the environment, but they absolutely do.'' BC Iron has been exporting iron ore for almost a year and yesterday returned its first operating profit, of $5.5 million for the six months to December 31. BC Iron expects to export 3.5 million tonnes for the year to June 30, 2012.
(sourced Brisbane Times)

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