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Iron Ore Seen Supported Above $110 by China, Fortescue Says

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Aug. 22 (Bloomberg) -- Iron ore prices will remain strong as sustained economic growth in China, the biggest buyer, supports demand, according to Fortescue Metals Group Ltd.

Prices will stay between $110 a ton and $130 a ton in the short to medium term, Chief Executive Office Neville Power said in an interview on Bloomberg Television today. The break-even price at Australia’s third-biggest exporter is “in the low $70 per ton,” he said.

Iron ore entered a bull market last month as China replenished stockpiles. While the country’s expansion slowed to 7.5 percent last quarter from 7.7 percent in the previous three months, data this month showed pickups in trade, manufacturing and industrial output. China will reach the government’s 7.5 percent growth target this year and maintain that pace in 2014, a Bloomberg survey of economists indicates.

“We see it continuing strong and growing at that 7 to 8 percent for the foreseeable future,” Power said, referring to the expansion of the Chinese economy. Growth of 7.5 percent “is a very, very strong underlying growth number,” he said.

A Chinese manufacturing index unexpectedly expanded in August from an 11-month low, adding to signs the world’s second-biggest economy is strengthening. The preliminary reading of 50.1 for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics compares with the 48.2 median estimate in a Bloomberg News survey.

Fortescue today reported net income of $1.75 billion that met analyst expectations. Shares gained 4.2 percent to A$4.26 in Sydney today.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin declined 0.9 percent to $137.80 a dry ton yesterday, according to The Steel Index Ltd. Prices have rallied 25 percent since falling to a seven-month low in May, averaging $135.49 since the end of last year.

To contact the reporter on this story: Phoebe Sedgman in Wellington at psedgman2@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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