Vale: Iron ore price will be at US$110/tonne over the next two years

Vale SA, the world’s biggest iron ore producer, expects to get about US$110/tonne for the steelmaking commodity over the next two years, below analysts expectations for market prices.

Vale, which ships about half its ore and pellets to China, sees prices being supported as urbanization rates in the world’s most populous country remain steady for the next 15 years, Chief Executive Officer Murilo Ferreira said today in a speech in Melbourne. Competitors including BHP Billiton Ltd. (BHP) and Rio Tinto Group expected prices to decline this year.

"It’s very clear for us that we have, on average, a product in the range of US$110/tonne," Ferreira said, addressing an audience including BHP CEO Andrew Mackenzie. "In the next one and two years, we will see this range."

Stimulus measures in China, the biggest iron ore consumer, aimed at supporting Premier Li Keqiang’s 7.5 percent growth target this year may support prices, according to Credit Suisse Group AG. Benchmark iron ore will average US$120/tonne this year and US$115/tonne next year, according to forecasts compiled by Bloomberg.

The average realized price for Vale’s iron ore rose to US$107.43/tonne in 2013 from US$105.41 in the previous year, according to a Feb. 26 filing.

China will accelerate work on key investment projects, the State Council, or cabinet, said March 19.

"The extent to which prices are merely supported or manage to stage any kind of more material rally will likely be determined by the magnitude of recently-announced Chinese stimulus measures," Credit Suisse (CSGN) said in a March 31 report.

Ore with 62 percent content delivered to the Chinese port of Tianjin fell 2.4% to US$115.30 a dry metric ton yesterday, taking its decline for the year to 14 percent, according to The Steel Index Ltd.

Concern over slowing economic growth in China may be misplaced, Ferreira said. "Frankly speaking, I’m much more concerned about the debt in the U.S."

With annual economic growth of 7%, China would probably need about 1.18 billion tonnes of iron ore a year by 2018, Ferreira said.