Bloomberg News

China Iron Prices Fall on Vale Sales, Nomura Says

March 03, 2009

Higher iron-ore shipments to China planned by Cia. Vale do Rio Doce, the world’s biggest producer, have caused prices for the steelmaking ingredient to decline, according to Nomura Securities analyst Abhishek Shukla.

The company said Feb. 20 it will boost shipments to a record 30 million metric tons this quarter, putting “direct pressure” on iron-ore spot prices, the London-based analyst said yesterday phone interview. The decline signals a market recovery may only occur in the second half, he said.

Vale shipped 12.1 million tons to China in the fourth quarter. A 12 percent decline in Metal Bulletin’s China iron-ore fines prices between Feb 13 and Feb. 27 after the news erased more than two months of gains, according to the analyst.

China iron-ore spot prices soared to a high of $197.60 a ton in February 2008 as steel mills searched for supplies amid high demand. Prices plunged 68 percent to about $63.50 a ton in October as the global credit crisis cut demand for steel used to make cars, appliances and in the construction industry.

“Vale will be shipping more and that’s hitting market sentiment,” Shukla said. “Prices had started recovering in the final quarter in response to Vale’s iron-ore production cut.”

Vale cut iron-ore output by 30 million tons a year from Nov. 1. This was “a far greater cut” than its two major competitors, BHP Billiton Ltd. and Rio Tinto Group, he said.

China spot prices rose 23 percent to $85 a ton in mid- February from $69 a ton in early November.

Raphael Biderman, a Sao Paulo-based analyst with Bradesco, said in a Feb. 27 note to clients that recent increases in iron- ore prices were “not sustainable.”

To contact the reporter on this story: Diana Kinch in Rio de Janeiro

To contact the editor responsible for this story: Dale Crofts at

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