Analysts and fund managers have told the Reuters news agency that Rio Tinto and BHP Billiton may get as much as 80 percent more for their iron ore this year. Steel mills are likely to accept the increase as an alternative to paying the spot price.
"Given the way the spot price is running, 80 percent is starting to look cheap," one Australian-based analyst said, with the spot iron ore price on a landed China basis now double the 2009 price at around $133 a tonne.
An 80 per cent increase would help to pay for new mines planned in Western Australia’s Pilbara region.
One fund manager in Singapore suggested that even if the iron ore miners put up their prices by 70 percent then, at its current share price, Rio Tinto would be trading on a P/E of only eight." That compares to a PE ration of almost 14 for Rio Tinto and 18 for BHP.
Earlier this week the China Daily newspaper suggested that miners have offered Chinese steel mills a 50 percent rise.
Also: Angang says China may have to accept higher iron ore prices. (Bloomberg)
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