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Morgan Stanley Boosts 2013 Iron Ore Estimate as Demand Climbs

Morgan Stanley raised its forecast for iron ore prices this year on expectations that accelerating economic growth in China, the biggest buyer, will boost demand.

Prices will average $133 a ton this year, 11 percent more than a previous estimate, analysts Peter Richardson and Joel Crane wrote in a report today. Prices may average $142 in the first quarter and fall to $125 in the third, they said.

Iron ore has climbed 70 percent since dropping to a three-year low in September as China’s economy rebounded from a seven-quarter slowdown and mills restocked reserves. Morgan Stanley joins Bank of America Corp., Deutsche Bank AG and JPMorgan Chase & Co. in predicting prices will decline in the second half as supply increases. The recent rally to the highest price in 15 months is unsustainable, Bank of America said this week.

“We continue to see trends of demand recovery in the property sector,” Morgan Stanley said, referring to demand for steel. Current prices won’t be sustained “indefinitely” as Chinese restocking ahead of the Lunar New Year is almost complete, supply disruptions ease with better weather conditions and Australian production increases, it said. China’s markets will be shut from Feb. 11 through Feb. 15 for the holiday.

Global seaborne demand will increase 8.3 percent this year, with China boosting purchases 12 percent, Morgan Stanley estimates.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin rose 1.2 percent to $147.70 a dry ton yesterday, according to data from The Steel Index Ltd. Prices reached $158.50 on Jan. 8, the highest since October 2011. Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the ore’s weight.

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