Improvement in China cheers market up; smaller fall in ore foreseen
DCI - 02/27/2009
The signs of improvement in the Chinese steel market put a break on the more pessimist expectations which expected a strong fall in the price of iron ore for 2009. Notwithstanding the negotiations between mining and steel companies are still, according to analysts, far from ending, since the mining companies are still waiting a greater recovery of the market in order to be able to bargain for higher prices for the commodity, the fall should remain well below what was projected at the apex of the financial crisis. The resumption became more evident after Vale announced it will ship 30 million tons of iron ore to China already in the first quarter, from a total of 50 million tons. Together with the news, other evidences like the improvement of the price of the ore in the spot market and also the cost of the sea freight. Waiting for a better moment to close the deal, the Brazilian mining company has already announced that, unlike its strategy in the last years, it will wait to see the agreements that will be closed by its Australian rivals BHP and Rio Tinto. The decision was taken so that the Brazilian mining company does not fall behind, as occurred last year, when the company was in disadvantage in relation to the agreements of the rivals by closing in February adjustments between 65% and 71%, whereas BHP and Rio Tinto got, in June, increases between 79.5% and 96.5%. Analysts affirm the great expectation of the company is to recover what it lost last year in relation to the Australian rivals.