Rio boosted by iron ore outlook
Economy
Written by Gary Howes   
Wednesday, 10 March 2010

Goldman Sachs raise their outlook on Rio Tinto based on iron ore price research.

 

Rio Tinto (LON:RIO) is 1.57% higher at 3,752 in mid-morning trade in London.

One factor that could be behind the share price rise is an analyst note on the outlook for iron ore prices.

Rio Tinto - the global diversified miner - is particularly sensitive to iron prices as this forms one of the companies core revenue streams.

So - what is the latest news on iron ore prices?

According to Goldman Sachs research iron ore contract prices may surge 60 percent to a record this year as demand from China increases and steel production recovers in developed economies.

The annual price for Australian fines starting April 1, a benchmark for Asia, may rise to $96 a metric ton, from $60 a ton a year earlier, Goldman analysts Malcolm Southwood and Paul Gray wrote in report dated yesterday.

The analysts also raised their estimate for the so-called spot, or cash, price of the ore by 15 percent to $113 a ton for 2010, according to the report.

Goldman Sachs JBWere, an Australian unit of US bank Goldman Sachs Group Inc., on Jan. 15 raised its forecast for contract prices to a 35 percent gain from 20 percent.

Goldman joins Morgan Stanley, Nomura Holdings Inc. and Royal Bank of Scotland Group Plc in raising forecasts for iron ore prices this month after cash prices for the steelmaking raw material jumped. The seaborne trade in iron ore will increase 10 percent, a record annual gain, to 1.01 billion tons this year on growing Chinese imports, Goldman said in the report.

Rio Tinto, as mentioned will be licking their lips over the news. A few other companies will also take heart - Brazil's Vale SA and BHP Billiton, with Rio Tinto form the three biggest global iron ore exporters.

And, Goldman raised its 2010 earnings per share estimate for London-based Rio 19 percent on higher commodity prices.

It raised BHP’s estimate 3.7 percent.