Global ore prices up 24%

Global iron ore prices climbed 24 per cent in the first five months of this year after India, the third-biggest supplier to China, imposed an export tax and demand for the steelmaking ingredient rose.

Prices averaged $87 a tonne on a cost, insurance and freight basis in the five months ended May, compared with $70 a tonne a year earlier, S B Chauhan, an adviser to the Federation of Indian Mineral Industries, said from New Delhi.

Five straight years of increases, fuelled by Chinese demand, have tripled global iron ore prices. Rates for 2007 climbed 9.5 per cent after rising a record 19 per cent last year.

The Indian government in March imposed an export tax of Rs 50 ($1.2) a tonne on shipments of iron ore fines with ferrous content of less than 62 per cent to ensure supplies are enough to meet local demand. All other grades attract a tax of Rs 300 a tonne.

Likely glut: Iron ore supply may exceed demand in 2009 as new projects in Australia and Brazil start production, the United Nations Conference on Trade and Development's Iron Ore Trust said.

"Demand growth would not be large enough to absorb the certain additions to iron ore capacity,'' the trust said in an emailed statement from Switzerland today.

Between 2007 and 2009, 375 million tonnes of iron ore production capacity was due to start up, said the trust, which publishes an annual market report with Sweden's Raw Materials Group. Seventy million tonne capacity was added last year, it said.

World iron ore production rose 12 per cent last year to 1.5 billion tonnes, with China overtaking Australia as the world's second-largest producer of the steelmaking raw material, after Brazil. Iron ore exports rose 6.1 per cent, with Australia's shipments of 248.4 million tonnes being the largest from a single country. China accounted for 43 per cent of world iron ore imports.