Biggest Exporter Australia Boosts Iron Ore Forecast on China

Australia, the world’s biggest iron-ore exporter, raised its price estimate for this year on expectations that increased steel consumption will boost imports into leading buyer China.

Prices will average $119 a metric ton in 2013, compared with a December estimate of $106, the Bureau of Resources and Energy Economics said in a report today, referring to rates at Australian ports. The country may ship 554 million tons of the steelmaking raw material in 2013, against 543 million tons estimated in December and 488 million tons in 2012, it said.

Goldman Sachs Group Inc. cut its estimate to $139 yesterday for ore delivered in China, while Morgan Stanley said March 7 the raw material had peaked and would decline over the rest of the year. Prices surged 55 percent from a three-year low in September as economic growth in China accelerated and port inventories in the country slumped.

“The announced approval of infrastructure investment packages in late 2012, particularly expansions to rail networks, as well as continued growth in commercial and residential construction are expected to support higher steel consumption,” the bureau said. China’s steel production may increase to 737 million tons in 2013 from 709 million tons last year, it said.

Growth Estimate

China will expand 8.1 percent this year after the weakest annual growth in 13 years in 2012, the median estimate of analysts compiled by Bloomberg shows. The country will spend 650 billion yuan ($105 billion) on rail-related fixed-asset investment in 2013, Rail Minister Sheng Guangzu said in January.

So-called apparent consumption of steel in China, which includes production and net imports, may rise 4.6 percent to 708.8 million tons in 2013, according to the mean estimate of six analysts surveyed by Bloomberg News. The country’s iron-ore imports will climb to 773 million tons this year from 745 million tons in 2012, according to today’s report.

Inventories at Chinese ports fell to 66.3 million tons in the week ended March 8, the lowest since March 2009, according to Beijing Antaike Information Development Co. Stockpiles were 67.2 million tons in the week to March 15, its data show.

New iron-ore supplies and slower growth in steel demand will weigh on prices in the year’s second half, Greg Lilleyman, Rio Tinto Group’s president of Pilbara operations, said yesterday. Steel demand growth in China slowed from 20 percent in 2010 to 2.1 percent last year, according to Citigroup Inc.

Rio, Vale

Goldman Sachs also cut its ratings and price targets for some miners of the ore yesterday, weighing on shares of Vale SA, the world’s biggest producer, BHP Billiton Ltd., the biggest mining company, and Rio, the second-largest exporter.

China on March 1 imposed its toughest real-estate curbs in a year, ordering the central bank to raise down-payment requirements and interest rates for some second mortgages, as well as enforcing a property sales tax.

The bureau’s price forecast referred to iron ore with 62 percent content free-on-board Australia. The same grade of ore delivered to the Chinese port of Tianjin fell 0.2 percent to $134.10 a dry ton today, according to The Steel Index Ltd. Goldman said yesterday iron ore free-on-board Australia may average $131 a ton in 2013.

Swaps traded today at $131.50 a ton for April and $118.50 for October, according to GFI Group Inc. data. 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 weight.

Before it's here, it's on the Bloomberg Terminal.