Spot prices set to jump in 2010

The new year may see a 20% increase in iron ore spot prices.

Iron ore spot prices are likely to increase by up to 20% in 2010, according to the chairman of miner Territory Resources.

“Although we continue to sell into the spot market, which makes it impossible to guarantee forward price structures, we now expect that the average selling prices for calendar 2010 will be at least 20% higher than the average price the company achieved during 2009,” Andrew Simpson said yesterday at the company’s annual general meeting.

“The market outlook for iron ore for at least the next year looks very positive.”

DJ Carmichael resource analyst James Wilson agrees that an iron ore spot price increase could be on the horizon in the new year.

He point to imbalances in the Chinese steel market as a major contributor to any increase.

“There are potential shortages in available capacities in the demand for next year in some sections of the Chinese steel business,” he told MINING DAILY.

“Domestic (Chinese) capacity for next year will be outstripped by domestic demand by about four million tonnes.

“People are starting to stare down the barrel of a potential price increase next year.”

Simpson warned however, that a significant increase in spot prices does not necessarily mean an equivalent increase in profits.

“Clearly exchange rates and the cost of ocean freight will continue to impact the company’s profitability,” he said.

Simpson said that 2010 will also see Territory increase its hunt for new acquisitions, primarily in carbon steel-related raw materials to feed the needs of its largest shareholder Noble Group.

“Initial acquisition targets will primarily be in iron ore, however quality opportunities in manganese and chromite ore are also currently under consideration,” he said.

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