Trading Room home page

Fortescue predicts $140 iron ore price

Market watch top headlines

Australian reports

World reports

Stocks to watch

ARI, OGC, AQG, RCT, SYD,

PERTH, April 21 AAP

April 21 2013, 2:06PM

Fortescue Metals chief executive Nev Power predicts the iron price will hover between $139 and $140 per tonne in the short term because of low iron ore stocks.

Australia's third largest iron ore miner says the commodity will then trade between $120 to $130 a tonne for the foreseeable future, preventing a repeat of last year's scare when the iron ore price tanked.

"We will have some fluctuations and in the short term I see this sort of price level of $139, $140 a tonne continuing because there are very low iron ore stocks," Mr Power told ABC's Inside Business program on Sunday.

He said steel stocks in China were relatively high but they were not increasing significantly and iron ore stocks were quite low.

"While there is some potential for a correction in steel production, it would only be minor and supply/demand balance is there in iron ore so there aren't the same factors that would create any significant drop in the iron ore price," he said.

He expects China's steel mills to keep producing 2.1 million to 2.2 million tonnes of steel a day.

Six months ago iron ore prices plunged to $US86.70 a tonne, dragging down Fortescue's shares and forcing it to refinance its debt.

Analysts said at the time the company could not repay its massive $12.6 billion in debt at those prices, but it now does not owe any debt until late 2015.

Mr Power also said the construction phase of Australia's mining boom was almost over as West Australian-based companies looked to cheaper alternatives overseas in the wake of Woodside's decision to shelve its onshore gas hub.

"To a large extent most of the construction is complete," Mr Power said.

"Construction costs have increased through Western Australia and Australia and I think we do need to be very careful not to price ourselves out of the market."

He added that globally there was no shortage of raw materials and commodities.

"It is about the ability to develop those projects cost-effectively and competitively and get them to market," Mr Power said.

Fortescue needed to constantly look at ways to improve the cost competitiveness of its projects.