The world's number one producer of the commodity, Vale, sees iron ore prices trading in a range of between USD 100 to USD 120 per tonne for an extended period.

Speaking at an industry event in China, Mr José Carlos Martins head of ferrous metals and strategy at the Brazilian miner also warned that market volatility will continue.

Iron ore was unchanged at USD 104.20 a tonne having clawed back more than 20% of its value since hitting a three and a half year low of USD 86.70 on September 5th 2012. This time last year the commodity was trading above USD 170 a tonne.

A Chinese industry body said roughly 40% of domestic producers have suspended production, when the price of ore falls below USD 100 many Chinese miners of the steelmaking ingredient become unprofitable.

Chinese miners simply cannot compete on price with the top exporting countries Brazil, Australia and South Africa. The iron content of Chinese ore currently stands at only 20%, down significantly from 30% in 2004 and well below the benchmark 58% and 62% ore from the likes of Rio Tinto, Vale and BHP Billiton.

Investment bank Standard Chartered predicted in an August study that Chinese iron content could sink to only 15% by 2026, further benefiting the big three producers who control over 60% of the 1 billion tonne global seaborne iron ore trade.

Vale said the company estimates Chinese steel production will rise 3% to 5% in 2013 which would also boost imports. While it continues to produce steel at a pace of near 2 million tonnes a day China's steel industry has been struggling with profitability.

Source - www.mining.com

(www.steelguru.com)