São Paulo – Iron ore prices are on the rise and should remain like that in coming months, causing an impact in the trade balance of Brazil and the Arab nations. Iron ore is one of the main products in the Brazilian export basket to the nations in the League of Arab States According to the Political Economics professor at Rio Branco Integrated Colleges, Carlos Stempniewski, the price of iron ore should not rise as much as it has over the last 15 years, but they should continue growing above global inflation.
Last year, for example, iron ore as a whole was the third item in the export basket from Brazil to the Arab world, second only to sugar and meats, and generated revenues of US$ 2.2 billion against US$ 958.2 million in 2009. The increase was 137.26% and was greatly influenced by prices. In the case of exports of agglomerated and concentrated iron ore, the kind most sold by Brazil to the Arab world, for example, the increase in revenues was 136% while the growth in volume was 46%, showing greater prices.
According to Stempniewski, one of the factors explaining the higher iron ore price is the sector concentration in the hands of two global leaders in the area, Vale do Rio Doce and Anglo American, which makes price formation easier. The heated global demand also weighs heavily, mainly in China, despite Europe and the United States not yet having recovered fully from the economic crisis. He explained that in the case of the United States and Europe, the economies are not growing, but are remaining at the same level.
Due to this, the market should expect, according to him, continued price elevation, but not at levels as high as in recent years. "A little above global inflation," explained the professor. Stempniewski said that there has always been a significant difference between the prices of iron ore and steel, which is one of the main end products. For this reason, producers of ore have been seeking greater and greater sales of pellets, a semi-industrialized product, instead of selling in the raw product, in powder.
Regarding the Arab market, the professor at Rio Branco Integrated Colleges said that places like Abu Dhabi and Qatar are developing much and need to import more iron ore, sustained by high oil prices. "In 1974 the barrel of oil was traded for US$ 4, it then reached its peak, climbing to US$ 170, dropped to US$ 40 and is now at around US$ 100. That is what is generating wealth to the Arabs," he said.
*Translated by Mark Ament
