Rio Tinto chief expects iron ore price to ease

Feb14, 2011 12:00AM, The Australian,

RIO Tinto, the world's second-biggest miner of iron ore, expects the price of the commodity to ease in two to five years as new supply comes to market.

Chief executive Tom Albanese said: "It's hard to find big new areas of supply globally, particularly in 2011.

"But in 2013, 2014 or 2015, you will see a lot of new iron ore coming into the market and it's probably going to put the market closer in balance than it is today."

Mr Albanese told ABC's Inside Business program that the iron ore markets, "when they come into equilibrium, will lead to some softness in those markets longer term.

"I think anyone that invests on the basis of today's prices is likely to be disappointed down the road.

"The question really will be: over the next five to 10 years will be, what will be the global steel demand and how will that translate to iron ore production? I think realistically we can expect a reversion from current levels."

Rio last week said its 2010 profit nearly tripled to a record $US14.3 billion ($14.25bn), largely due to record prices for iron ore and copper during booming demand from China.

Expanding its Pilbara iron ore operations in Western Australia by over 50 per cent over the next five years would be Rio's top growth priority, Mr Albanese said.

On copper, he said the longer prices remained high, the greater the supply response would be.

"I think we will see a continued period of strong copper pricing, largely because many of the large mines . . . are seeing declining grades (and) deepening pits, but you will see new mines . . . so we will see new copper supply coming in and that will begin balancing out with demand."

In regard to potash, Mr Albanese said he would rather look at small mergers and acquisitions opportunities to bolt on to the existing Rio businesses.

(sourced:Dow Jones Newswires)

Australia commodity price index surges in Jan - RBA

SYDNEY Feb 1, 2011 (Reuters)
The Reserve Bank of Australia's (RBA) index of commodity prices surged 4.5 percent in January, from December, to reach a fresh record high as rising iron ore and coal prices augured well for export earnings.
That followed an upwardly revised increase of 4.3 percent in December. The index was up a massive 49 percent in special drawing right (SDR) terms, compared to January last year. The index reading of 133.0 far surpassed the 2008 peak of 119.5.

In Australian dollar terms the index jumped by 4.9 percent in January and was up 35 percent for the year. The index also hit a record high in U.S. dollar terms, to be up 47 percent on January last year.
The largest contributor to the rise in January were increases in the estimated prices of iron ore and coking coal, reflecting the movement to higher contract prices in the first quarter and strength in spot prices in the month.
The RBA noted the strength in prices was broad based, with only gold and sugar prices falling in the month.

Much of the increase for all of 2010 reflected huge price increases for iron ore and coal, Australia's two biggest export earners. That has boosted Australia's terms of trade, lifting profits, investment, employment and tax receipts. (Reporting by Wayne Cole, reuters)