Iron Ore Prices to Rise 10-15 pct This Year - Group

CAPE TOWN, Feb. 2 -- Iron ore benchmark prices are likely to go up by 10-15 percent this year, while demand will rise by around 10 percent compared with last year, the Raw Materials Group said on Monday.

Magnus Ericsson, a partner at the Raw Materials Group, a consultancy which provides mining data and conducts surveys on metals, told a mining conference in Cape Town the demand for iron ore would mainly be driven by China and India following the recovery of the global economy.

"Growth will be driven by Asia, not only China but India as well," he said.

Ericsson said iron ore supplies were likely to decline in China due to poor grades and this would enable other exporters to take advantage and export more of the mineral to the Asian country.

"The average grade of Chinese production has considerably gone down. High freight rates protected domestic Chinese producers, that will go away and expose the Chinese to competition," Ericsson said.

Ericsson said the production of the mineral would continue to be dominated by the three big global players, BHP Billiton (BHP.N: Quote), Brazilian mining giant Vale (VALE5.SA: Quote) and Rio Tinto (RIO.L: Quote) while the steel industry, particularly automobile manufacturers would boost demand following stimulus packages provided by Western governments to the vehicle.

Ericsson said Australia, which took the lead among big iron ore producers in 2009 would remain the largest producer for the next few years, especially if a joint venture project between two of the major producers was agreed.

Ericsson said some iron ore projects in West Africa had stalled due to political problems giving a major advantage to Brazilian and South African producers to ramp up output.