RIO DE JANEIRO, Brazil (Reuters) - Brazil's CVRD (RIO.N: Quote, Profile, Research, Stock Buzz)(VALE5.SA: Quote, Profile, Research, Stock Buzz), the world's biggest iron ore producer, said on Tuesday that Chinese demand should remain strong for at least another four years and a price increase has to occur this year.
Roger Agnelli, the company's chief executive, said at the Reuters Latin America Investment Summit in Rio de Janeiro that Europe and the United States were also consuming more ore.
"Supply and demand are not equal. There is strong demand in Asia, in the U.S. there is a recovery of the steel industry, demand is strong in Europe," Agnelli said, adding steel companies' profits "beat all the records" and ore freight prices had fallen sharply.
"There has to be a price rise (for iron ore)... as big as the market permits," he said, declining to predict the size of an eventual increase. Last year, iron ore miners raised their benchmark prices by 71.5 percent.
Agnelli did not rule out annual price talks with clients lasting past April 1, when new prices have to come into effect, saying CVRD was prepared to negotiate as long as necessary.
Referring to Chinese predictions that steel output there may fall starting from 2010, Agnelli said: "Well, at least we have four strong years ahead. Before then, there is a lot of talking to do with them."
Ma Jianwu, managing director of Guangzhou Iron and Steel Corp. Ltd. (600894.SS: Quote, Profile, Research, Stock Buzz) said earlier on Tuesday that 2006 term iron ore price talks should conclude in early April with a likely agreement on a price increase of 10 percent.
Comments by steel industry officials seem to have moved away from the industry's previous insistence that prices for 2006 term ore should fall. China's steel mills, including Guangzhou Steel, are represented by Baosteel Group in annual price talks. T
Mining giants CVRD, BHP Billiton Ltd./Plc (BHP.AX: Quote, Profile, Research, Stock Buzz)(BLT.L: Quote, Profile, Research, Stock Buzz) and Rio Tinto Ltd./Plc (RIO.AX: Quote, Profile, Research, Stock Buzz)(RIO.L: Quote, Profile, Research, Stock Buzz) are seeking up to a 20 percent increase for 2006 prices that take effect on April 1. Continued...
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