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Iron Ore Prices to Remain Steady on China Demand, Steel Output

Iron ore prices will probably be supported by “robust” demand in China, the biggest steel producer, outweighing concerns that global economic growth may slow, according to Mine Life Pty.

“There has been weakness in other parts of the world but because China is going to hold up reasonably, prices are going to stack up pretty well,” said Gavin Wendt, founder and senior resource analyst at Mine Life in Sydney. Prices may average between $130 a metric ton and $140 a ton this year, he said.

China’s economy may grow 8.4 percent this year, compared with global growth of 2.5 percent and a 0.3 percent contraction in the euro area, the World Bank said Jan. 18. World production of the steel ingredient looks to be “stabilizing”, Credit Suisse Group AG said in a report yesterday. Steel output in China rose in December, after declining for six months through November, World Steel Association figures show.

“Their demand for steel, production of steel and their consumption of iron ore is going to remain fairly robust,” Wendt said, referring to China. “There’s enough demand out there to sustain prices, and the production side seems to be reasonable.”

Vale SA, the world’s largest iron-ore producer, suspended a force majeure on some of its supply contracts after heavy rain that hindered output in southeastern Brazil subsided, the company said yesterday. Vale said Jan. 11 that it will lose 2 million tons of the steelmaking ingredient output, about 20 percent of its January output of iron-ore in southern Brazil, because of heavy rain in three of the country’s states.

“We expect a continued pick-up in global steel production run rates through 2012,” Credit Suisse analysts including Ric Deverell wrote in the report. The company maintains “our positive outlook for iron ore prices through the coming year.”

Iron ore with 62 percent content delivered to the port of Tianjin traded unchanged at $139.80 a ton yesterday, data from The Steel Index showed. Prices are up 0.9 percent this month, after gaining 5.8 percent in December and 11 percent in November.

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