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Iron-Ore to Stay Above $100 for Next Five Years, Barclays Says

Iron-ore spot prices will probably remain above $100 a metric ton for the next five years on Chinese demand and project delays, Barclays Capital said.

The seaborne iron-ore market will have a supply deficit of 23 million tons in 2011 and 9 million tons in 2012, Barclays Capital analysts including Leonardo Correa in Sao Paulo wrote today in a note to clients. The analysts increased their price forecast to $160 per ton next year, from $140, citing “overly optimistic” estimates on the amount of potential new supplies.

Several iron-ore projects face “difficulty” delivering growth, including Anglo American Plc´s Minas Rio project in Brazil and Vale’s expansion of the Carajas mine, also in Brazil, which “may be delayed by around two years on a slower environmental permitting process,” the analysts said.

“Markets will likely remain critically tight for the next three years, at least,” they wrote.

Rio de Janeiro-based Vale, the world’s biggest iron-ore producer, is “well positioned to benefit from the super cycle,” the report said. “While political risks seem to be rising, we expect strong fundamentals and growth opportunities to remain the main value drivers.”

The cost of 62 percent iron ore delivered to the Chinese port of Tianjin was unchanged at $167.80 per ton today, its highest level in more than six months, according to The Steel Index. Prices rose 68 percent in the past 12 months.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at o jspinetto@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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