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Iron ore prices will definitely fall.

Issued at 2011-05-24



ONE of Australia's biggest export customers - Chinese steel powerhouse Baosteel - says there is a "bubble" in the market for iron ore and the price of the star commodity will fall as new projects bolster supply.

The comments from Baosteel chairman Xu Lejiang came as Rio Tinto, the world's second biggest producer of iron ore, this week shipped its one billionth tonne of the key steelmaking ingredient to China.

Minerals prices have soared in the past year, fuelled by limited supply, and iron ore - Australia's leading export - is expected to contribute more than $60 billion to the nation's coffers next financial year.

"There is a bubble in this market, many are gambling," Mr Xu told Bloomberg.

"Everyone who has money is rushing in to invest in iron ore.

"Iron ore prices will definitely fall at some point because the supply-demand situation will have a turnaround."

Rio Tinto, BHP Billiton and Brazilian giant Vale are each investing in major iron ore growth projects and Mr Xu yesterday said Baosteel was "very interested" in taking part in Rio and Chinalco's planned $US10 billion development of the huge Simandou deposit in Guinea.

Australia's third-biggest iron ore producer, Andrew Forrest's Fortescue Metals Group, yesterday revealed the first reserve estimate - 716 million tonnes - for its Solomon Hub in Western Australia.

It said this number was expected to eventually double.


Source: news.com.au



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