Iron ore output drop keeps markets tight: UNCTAD

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Iron ore output fell in 2009 for the first time in seven years despite continued growth in trade to record levels, keeping market conditions tight and prices high until 2012, a UN thinktank said Friday.

Global output of the raw material for steel fell by 6.2 percent year-on-year in 2009 to 1.588 billion tonnes, the UN Conference on Trade and Development (UNCTAD) said in a report on the iron ore market.

China, once the world's largest iron ore producer, was only the fourth largest producer with output of 234 million tonnes last year behind India (257 million tonnes), Brazil (300) and Australia (394).

The report said mining output declined in most countries last year except Australia and South Africa, while Chinese domestic production was expected to fall even further this year due to widespread mine closures.

Nonethless, trade in iron ore reached a record 955 million tonnes in 2009, growing by 7.4 percent over the previous year largely thanks to increasing Chinese imports, UNCTAD added.

Australia exported the equivalent of 92 percent of its output, an increase of 17 percent, ahead of Brazil and India.

The report cautioned that supply would continue to lag behind demand in the short term, while pricing had become more obscure following the breakdown of an annual benchmark negotiation process on iron ore markets earlier this year.

"We think that this year and next year the world iron ore market will be characterised by tight conditions," said UNCTAD official Alexei Mojarov.

Mojarov predicted that new iron ore mining capacity coming online would gradually bridge the gap with continuously growing demand over the coming years.

"We believe that in the future the supply will gradually catch up and prices will gradually decline from present extreme levels but will stay at a higher level than 2008," he told journalists.

The report said 75 million tonnes of new cpacity came on tap last year, with 685 million tonnes expected to come onstream between 2010 and 2012.

The annual report was compiled by UNCTAD and Swedish mining analysts Raw Materials Group.

© 2010 AFP

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