SYDNEY Oct 3 Australian iron ore prospector
Centrex Metals Ltd (CXM.AX), backed by Chinese steel mills, on
Wednesday said the upward trend in ore prices was set to
continue for another four years.
"The supply imbalance will not be rectified until around
2011," Centrex Managing Director Gerard Anderson said.
Anderson's prediction doubles the timeframe set out by
another Australian prospector, Fortescue Metals Group Ltd
(FMG.AX) Chief Executive Andrew Forrest, who recently said the
up trend had only a further two years to run.
Iron ore prices have risen for five straight years, helped
by strong demand from expanding steel mills in China, sparking
a battery of new mining entrants in Australia, including
Fortescue and Centrex.
Broker UBS is forecasting a 25 percent rise iron ore prices
for the shipping year starting April 1, 2008.
Anderson, a former executive in BHP Billiton Ltd/Plc's
(BHP.AX)BLT.L> iron ore division, a major supplier, also said
he expects his former employer to push for freight differential
compensation from iron ore customers in Asia.
The move, which could mean Chinese steelmakers pay more for
Australia ore, comes more than three decades after BHP and
others started digging ore to supply Japanese mills.
Due to higher freight rates, landed iron ore costs from
Brazil, home to the world's largest iron ore miner CVRD
VLE5.A(RIO.N), are substantially higher than Australian
"They (miners) have been taking the rough end of the
pineapple for 30 years and that's now changing," Anderson said,
referring to the annual price negotiations with Japanese mills
and CVRD, BHP and Rio Tinto Ltd/Plc (RIO.AX)(RIO.L) that only
recently included Chinese mills.
BHP first raised the idea of freight compensation in 2005,
but dropped the idea at the insistence of Chinese mills.
However, BHP marketing director Tom Schutte told an
analysts briefing that securing freight compensation was still
on the company's agenda.
"We haven't stopped discussing it since 2005," Schutte
China's Baotou Iron and Steel (Group) Co Ltd (600010.SS)
has agreed to provide up to A$40 million ($38 million) to help
fund pre-development studies on an Australian iron ore mine
Centrex wants to develop.
Baotou already holds 10.13 percent of Centrex and has
agreed to buy five million tonnes of ore over five years from
Another Chinese steelmaker, Shenyang Orient Iron & Steel,
holds a 7.03 percent interest in Centrex.
With its rich ores and direct shipping routes to Asia's
fast growing economies, and in particular China, Australian
iron ore mines are attracting attention among Chinese steel
mills hungry for raw feed, Anderson said.
Last month, China's Anshan Iron & Steel Group Corp
(0347.HK) (Ansteel) agreed to help underwrite two new iron ore
mines in Australia, in exchange for a 12.78 percent interest in
Gindalbie Metals Ltd (GBG.AX).