EXPECTATIONS of higher benchmark iron ore prices are rising with the rumour that Brazilian mining giant Vale has pitched a massive 70 per cent price increase at Chinese negotiators.
Such a rise would replicate the 71.5 per cent price rise in 2005-06 when the market was caught short by iron ore suppliers badly underestimating the extent of China's soaring steel production and consequent iron ore demand.
The spot market has been trading at more than double the current delivered contract price, but a price increase of 70 per cent is seen as probably an opening gambit from the Brazilians.
That is because the spot market represents only a small part of the global seaborne market.
New production is also expected to bring tight iron ore markets more into balance this year, suggesting the surge in iron ore prices is nearing its peak.