By Kishori Krishnan Exclusive To Iron Investing News

Share Ahead of contract talks, iron-ore miners are seeking a price rise. On the horizon is a firmer demand in China, which has ensured that despite concerns about the length and depth of the global recession, iron ore miners are pushing for as much as a 5 per cent increase in the annual contract price beginning in April.

The miners, which only a month ago were hoping to avoid a decline and keep prices flat, say a recent uptick in demand from China may signal that the market has bottomed out. They also note that spot prices have inched up since late last year. At this point, China is the only country showing increased steel production and continues to be the world’s largest steel producer, consumer and exporter. Last month, China was the only major country to record an increase in steel production, up 2.4 per cent from January 2008.

According to the World Steel Association, steel production by all countries fell 24 per cent in January from the year-earlier month. Increased steel usage in China tends to tighten supply in other countries and provides a lift in pricing.

Fabio Barbosa, finance director at Brazil’s Companhia Vale do Rio Doce, (RIO), said that it has seen an uptick in iron ore demand in China. “This is a very positive development. It is still too early to say that a turnaround is near,” said Barbosa. Vale shipped nearly twice as much iron ore, 30 million short tons, to China in January compared to December.

Chinese steel price had gone up in the beginning of this month bolstered by Beijing’s 4 trillion stimulus package. However, mounting steel production growth has sent a chill down the spine of steel trade. And many smaller mills have halted or slashed production again after short-term restarting in January.

Meanwhile, US finished steel imports in January was up by 15 per cent. Based on preliminary Census Bureau data, the American Iron and Steel Institute reported that the US imported a total of 2,343,000 tonnes of steel in January 2009, including 2,134,000 tonnes of finished steel up by 13 per cent and 15 per cent, respectively.

Total and finished steel imports on an annualized basis are down by 12 per cent and 1 per cent, respectively versus 2008. Annualized total imports of steel in 2009 would be 28.1 million tonne. The 15 per cent increase in imports occurred while US domestic facilities operated at a 44 percent utilization rate in January.

Rio on a roll

Rio Tinto (ASX: RIO) has been told that delays in the export of Pilbara iron ore could work in its favour by increasing demand for the mineral. Widespread flooding in the west Pilbara last week isolated several Rio operations and blocked rail routes. The company says, while conditions have improved, full operations are unlikely to resume until the end of the week.

Resource analyst Peter Strachan says, while the number of ships delayed will be minimal, it could be enough to tighten up the international market. “I think that in the short-term that there may be some positive impact on the spot price for iron ore, and we’ll have to wait and see how that translates to the contract prices, which are due to be decided in April,” he said.

Rio Tinto Group, the world’s third-largest mining company, is also likely to calm “dissident” investors over their concerns about the terms of a $19.5 billion investment from Aluminum Corp. of China Ltd., Liberum Capital Ltd.

According to a report in Bloomberg, Rio’s plan has been criticized by Legal & General Plc, the mining company’s second-largest institutional shareholder, which said Rio should put forward an alternative fund-raising proposal to be considered by all investors. Shareholders were “deeply concerned” by the deal, the Association of British Insurers, representing 400 institutional investors, said. “Curiously enough if the markets continue to sag, the better this deal looks,” Rawlinson wrote. “It is also clear that should markets deteriorate from here, the Chinalco deal undoubtedly brings greater downside protection and will turn out to have been the correct choice as taken by the board.”

New project

Miners around the world have been carefully examining new projects amid sliding prices and financing woes as the global credit crisis bites. Australia’s Indo Mines Ltd (IDO.AX) is set to produce 1 million tonnes of pig iron from its project on Indonesia’s Java island by 2012, despite the impact of the global credit crisis, an executive said on Wednesday.

Indo Mines has a 70 per cent share in PT Jogja Magasa iron, an Indonesian firm planning to mine iron sand and set up Indonesia’s first pig iron smelter in central Java’s Yogyakarta province. The firm, which signed a $1.1 billion mining contract in November last year, will begin exploration of iron sands in 2011 and expects commercial production of 1 million tonnes of pig iron per year to start in 2012.

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