Iron ore benchmark set to soar

Investment banks have predicted a massive leap in the iron ore benchmark prices for this year.

The iron ore industry has seen an about face after nearly collapsing a year ago, with analysts predicting the benchmark price to leap by up to 70%.

Analysts at investment banks Nomura and Morgan Stanley have predicted the benchmark price of iron ore will rise between 60% and 70% this year, the West Australian reported.

These forecasts are a strong rebound from the bear market of the previous year, in which iron miners saw price cuts of approximately 30% to Chinese mills.

Increased demand from these Sino steel mills as well as commodity stock piling has forced the rise in the benchmark.

Japanese investment bank Nomura’s forecast is close to the year on year price rise seen by miners in 2005, and the enormous benchmark price’s leap of 85% in 2008 on the back of the resources boom.

The Japanese bank’s 70% prediction, which is up from its previous forecast of around 40% to 50%, is due to the major miners using the iron spot price as a basis to begin benchmark price negotiations.

The driver for these negotiations is BHP Billiton, which is supported by Rio Tinto and Brazil’s Vale, which are aiming to create a more transparent pricing system so as to avoid missing out on higher spot prices.

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