If, as forecast, steel demand in China soars next year, then negotiations with major iron ore producers, who are mainly in Australia, will become interesting.
Luo Wei, Shanghai-based analyst with China International Capital said domestic crude steel consumption may increase to 606 million metric tons in 2010, following a 14% gain this year to 541.4 million tons. He added that benchmark contract prices for iron ore may rise 15 to 20%.
This exceeds the 5% gain the World Steel Association predicted in October for China demand next year.
Steel prices in the country have risen 10% from this year’s October 15 low as manufacturers and traders deplete stockpiles and mills raise prices because of rising costs.
Bloomberg suggests the steel price revival will hamper China’s ability to bargain contract iron ore prices paid to Rio Tinto Group, BHP Billiton and Vale SA.
According to a Bloomberg News, a survey of analysts last month prices may jump 14% in 2010 to the second-highest on record.