March 2 (Bloomberg) -- Iron ore contract prices will rise 70 percent in 2010 as producers of the steelmaking ingredient seek accords pegged closer to prevailing spot prices, Nomura Holdings Inc. said.
Contract prices for iron ore and coking coal, which is also used in steelmakers' blast furnaces, will double in the next two years, Nomura analysts Paul Cliff and Gavin Wood wrote yesterday in a note. The bank previously predicted an increase of 40 percent to 50 percent for iron ore prices.
Vale SA, Rio Tinto Group and BHP Billiton Ltd., the world's three biggest iron ore producers, are likely to win higher annual benchmark prices in 2010 as global steel production recovers. The so-called cash, or spot, market price of ore delivered to China, the biggest buyer, rose last week to the highest in more than a year.
"Recent comments from both Rio Tinto and Vale suggest that contract prices must be settled much closer to spot prices or the benchmark pricing system will not survive," the London-base analysts wrote. "The iron ore market remains one of the only major commodity markets with such a large discrepancy between spot and annual contract prices and we think convergence is inevitable."
Prices will advance 60 percent, Morgan Stanley said today in a note. Melbourne-based BHP, the U.K.'s Rio, and Australia's Fortescue Metals Group Ltd. may miss out on about $20 billion of sales a year by not selling ore mined in Australia at cash prices, Goldman Sachs JBWere Pty said yesterday.