Bloomberg reported that prices of iron ore, trading near a two year high, may continue to climb and lead to production cuts and losses for Chinese steelmakers.

Mr Deng Qilin chairman of the China Iron & Steel Association said that the raw material price may keep rising in the second and third quarters. Jiangsu Shagang Group Co., the nation’s fifth largest steelmaker, will consider reducing production on higher costs.

The global economic recovery has spurred demand for iron ore and allowed Vale SA and BHP Billiton Limited this year to break with a 40 year custom of selling on annual contracts and win a 90% price increase for quarterly sales starting April 1st 2010. Crude steel output in China, the largest maker, jumped 25% in the first quarter.

Iron ore for immediate delivery fell 1.3% last week to USD 183.50 a tonne. It touched USD 189.50 a tonne for the week ended April 30th 2010, the highest since March 2008. Import prices averaged USD 96.31 in the first quarter, an increase of 20.7% YoY.

Vale, BHP Billiton and Rio Tinto Group, the three largest exporters of iron ore, threatened to cut supplies to China unless steelmakers accept their price demands.

(Sourced from www.bloomberg.net)