Iron ore contract prices may rise 10 percent next year on expectation of rising demand from China, according to Macquarie Bank Ltd., the largest investment bank in Australia, the biggest iron ore exporter.
The bank had previously forecast a 15 percent drop in the price of the steelmaking material in 2008, Macquarie said in a note to clients dated today. Citigroup Inc. also raised its forecast this month to a 7 percent increase, reversing an earlier estimate of a 20 percent fall.
Iron ore has risen for five straight years to a record this year on increased demand from China, which supplies one-third of the world's steel. The increases have driven profits to all time highs at BHP Billiton Ltd. (BHP), Rio Tinto Group (RIO) and Cia. Vale do Rio Doce, the mining companies that account for three-quarters of global trade in iron ore.
``The pace of Chinese industrial production is expected to increase as infrastructure spend accelerates, in part due to surplus liquidity,'' the Macquarie's note said.
Chinese steelmakers may import 4.3 percent more of the steelmaking ingredient in 2007 and 7.4 percent in 2008, Citigroup's analyst Alan Heap said in a March 6 report.
China's steel output rose 23 percent to 74.3 million tons in the first two months this year from a year ago, the National Bureau of Statistics said today through its agency.
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