Fortescue's Forrest Sees 'Sudden Dips' in Ore Prices in 2012

Dec. 7 (Bloomberg) -- Fortescue Metals Group Ltd. (FMG), Australia’s third-biggest exporter of iron ore, sees strong prices for the steelmaking ingredient in 2012 with potential for quick declines similar to those seen this year.

Prices “will be reasonably strong, but don’t be surprised if there’s a couple of sudden dips,” Chairman Andrew Forrest said in an interview in London today. “I call reasonable anything above $100. That’s a good sustainable iron ore price.”

Prices for the steelmaking raw material delivered into China slumped in October, falling 31 percent for the month, including the biggest one-day drop in more than two years as demand waned. Rio Tinto Group (RIO), the second-biggest exporter, last week said some Chinese buyers have had credit difficulties while customers are still purchasing all its output.

"All of our customers have been very strong and I would point out that Chinese growth has collapsed to over nine percent,” said Forrest, Australia’s third-richest person. “If any other economy had over nine percent they would all be drinking champagne.”

China’s economy grew by 9.1 percent in the third quarter compared with a year earlier, the slowest pace in two years. The credit-tightening policy has curbed demand and prompted local mills including Baoshan Iron & Steel Co. (600019) to cut prices. The debt crisis in Europe has raised concerns that economic growth may slow in emerging countries, Tokyo Steel Manufacturing Co. said Nov. 21.

"Fortescue’s in a unique position in that it’s very popular in China,” said Forrest, who controls about 32 percent of Fortescue, which has a market value of A$15 billion ($15 billion).

Since Oct. 31 the price of ore delivered to China’s Tianjin port has rebounded 18 percent. It dropped 0.1 percent to $139.40 today.