Iron Ore Price Increase Estimate Revised Higher

Darlington Musarurwa
15 Mar, 2010
New York City

Stocks in Australia declined fractionally tracking losses in commodities markets. Analysts lifted their estimate of iron ore prices in the current year to more than 60% increase as Chinese steelmakers seek a government intervention in price negotiations.

[R]3:00 AM New York, 7:00 PM Sydney – Stocks in Australia declined fractionally tracking losses in commodities markets. Analysts lifted their estimate of iron ore prices in the current year to more than 60% increase as Chinese steelmakers seek a government intervention in price negotiations.[/R]

Australian stocks dropped led by commodity stocks as investors focused on new regulations proposed by the U.S. lawmakers. Banks and financial services companies with more than $50 billion in assets may be regulated by the Federal Reserve for the excessive risks that may be detrimental to the entire financial system.

Gold prices fell 0.1% to $1,107 per ounce and crude oil prices slipped 0.5% to $80.8 per barrel.

In Sydney trading ASX 200 Index declined 0.7% or 34 to 4,784.10.

Of the ASX 200 index stocks, 48 gained, 136 fell, and 16 were unchanged. Charter Hall Group led gainers in the index shares with a rise of 3.7% followed by Karoon Gas Australia climbing 3%.

The Australian dollar decreased 0.1% to 91.38 U.S. cents.

RBA Still a Reluctant Regulator

Reserve Bank of Australia assistant governor (Financial System) Malcom Edey said today at the 15th annual congress of Cards and Payments Australia the central bank is a “reluctant regulator” of competition within the electronic cards payment system.

Edey notes the bank is not prepared to step back entirely and allow competition to contain fees and further added that the recent competition in the industry has been healthy but regulation is still needed to keep the rates down.

Edey added, “The Board took the view that good progress was being made by the industry, but that it wasn’t yet enough to provide sufficient confidence that fees would be held down in the absence of direct regulation.”

Government Won’t Intervene in Iron Ore Talks

The Australian reported that the country’s trade minister Simon Crean said today government will not intervene in iron ore price negotiations between companies and Chinese buyers.

Rio Tinto and BHP Billiton are the major miners that are negotiating iron ore supply contracts with buyers.

China negotiates an annual benchmark iron ore price with Brazil based Vale SA and Rio Tinto and BHP Billiton and most of the country’s top 10 steel mills petitioned Premier Wen Jiabao over the weekend to intervene “difficult” iron ore talks.

Separately financial analysts are raising their estimates of iron ore price increase this year. JP Morgan analysts David George lifted his estimate of price increase to 65% from the previous estimate of 20% increase, RBS analyst team led by Tim Huff revised the increase estimate to 60% and ING Groep NV analysts increased its estimate to 80%.

Centro to Sell Surfers Paradise Mall

Centro Properties informed investors in a letter dated March 9 that it is looking to sell the A$202 million Surfers Paradise mall, according to a report in the Australian Financial Review.

The company is struggling to repay the MCS 11, the unlisted syndicate that owns the property and investors are looking to exit the fund.

Centro contends that if it get offers that are substantially less that the mall’s value, it will defer the sale of the property by extending the syndicate’s loan terms which will need approval from 75% of investors.

According to the Australian Financial Review, the Surfers Paradise mall’s value has fallen from A$232 million in December 2007.

ASX Movers

Envestra Limited led the decliners in the S&P ASX 200 index with a loss of 7.2% followed by losses in iSOFT Group Limited of 5.0%, in Emeco Holdings Limited of 4.8%, in Gindalbie Metals Ltd 4.7% and in Abacus Property Group 4.7%.

Charter Hall Group led gainers in the S&P ASX 200 index with a rise of 3.7% followed by gains in Karoon Gas Australia Ltd 3.0%, in Aquila Resources Limited of 2.9% and in Southern Cross Media Group of 2.8%.

Other Movers

Arrow Energy Limited rose 0.9% to A$5.25 and the energy explorer is expected to reject a A$3.26 billion takeover bid from Royal Dutch Shell plc and PetroChina Company Limited, according to a report in Australian Financial review.

Liquefied Natural Gas Limited closed unchanged at A$0.51.

Macarthur Coal Limited rose 0.3% to A$11.90 after the exporter of pulverized coal used by steelmakers planned takeover of Gloucester Coal Ltd, which would see the target''s top shareholder, Singapore-based Noble Group emerge with a 24.6% stake in Macarthur.

Newcrest Mining Limited the gold producer fell 1.5% to A$33.69.