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Now, iron ore market is being characterized by a good strengthening due to a rise in the following two factors: spot prices and benchmark rates. It is expected that the second is going to undergo a rise at least 20 per cent next year.
Recent trade has resulted in a sharp run up in the shares of iron ore companies.
For example, the iron ore producer Fortescue Metals Group Ltd. had a rise nearly 13 per cent on Wednesday; however, on Thursday it decreased to 0.6 per cent, so the final price was $5.17. The overall rise of this company is accounted to 25 per cent since lows in December.
Despite a broader market falls, other smaller producers are also having worthy results: Atlas Iron gained 4.69 per cent, BC iron – 2.73 per cent and Brookman Resources - 4.65 per cent.
According to the data reported by the experts iron ore producers follow quite positive trends in current benchmark negotiations. Most of the experts have agreed that it will be seen a rise in iron ore’s basic price, that will constitute from 20 per cent to 30 per cent.
For the moment big iron ore producers can’t reach a settlement with large steelmakers about this year’s benchmarks rates.
In this concern, it shouldn’t be forgotten the last year experience of Chinese steel producers, when they couldn’t make an agreement in the benchmark question and were forced to pay higher rates than their competitors.
Also the experts have outlined the influence of Indian market at a level of prices.
Previously, India was a net importer of iron ore, but nowadays the situation has changed and this country possesses more steady positions as an exporter. So, the influence on prices growth is getting stronger.
There is even an opinion that benchmark iron ore prices will rise about 40% during the current negotiation, although at the moment price rise is expected to be 20%.
After studying benchmark rates, negotiated last year, it can be stated that spot prices were currently 80% above.
In respect of Chinese demand, the experts indicate that it constantly growing and after a year of such acceleration can reach its peak.
Among the variety of assumptions in regard to the way China is going to settle the problem, there was one based on the idea to use detained employee of Rio Tinto company as a pawn in dealings with the mining companies. But this assumption is appeared to be a rumour.
As is generally known, Mr. Stern Hu, an employee of Rio Tinto, known for being Australia’s largest iron ore producer, was taking part in negotiations with China.
But on July 5 he and three Chinese colleagues were arrested for spying. Later Mr. Hu’s charge was reduced to violating commercial secrets and bribery.
Until now Mr. Hu and other Rio Tinto employees are detained.
According to Chinese law investigation period must last until the middle of the January, but there are possible extensions if the investigation is not completed.
