JPMorgan Chase, citing a meeting with the biggest mining company's executives, said that BHP Billiton expected iron ore prices to recover as high cost producers in China stop production.

JPMorgan analysts including Mr Lyndon Fagan, citing comments made by BHP CEO Mr Marius Kloppers at a meeting with analysts in Sydney, wrote in a report that as much as 140 million tonnes of annual Chinese capacity is unprofitable at current iron ore prices.

Mr Fagan said that steel mills might start placing purchase orders as they begin to restock iron ore over the next eight to 12 weeks.

Chinese Premier Mr Wen Jiabao is overseeing a USD 23 billion investment in new mills to stimulate vehicle making and housing to reignite growth that fell in the second quarter to the slowest in three years.

According to the median of seven analysts estimates, the spot price of iron ore may gain as much as 67% to average USD 145 a tonne in the fourth quarter.

Iron ore for immediate delivery to the Chinese port of Tianjin has dropped 52% over the past year to a three year low of USD 86.90 a tonne.

Mr Neville Power CEO of Australia's third largest iron ore producer Fortescue Metals Group said a week ago that the price might rebound to USD 120 a tonne later this year.

JPMorgan said that coking coal prices might not gain as producers respond more swiftly than BHP had anticipated. The coking coal market will continue to expand until 2025 or 2030 before it stagnates.

Source - Bloomberg

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