Iron ore prices may increase up 50%

Steel industry executives and analysts warned that iron ore prices may increase up to 50% next year due to short supplies and China's rising iron demands, the Financial Times reported. Baosteel, China's largest steel producer, will lead negotiations with other steelmakers and mining companies to set the price for for long-term contracts for the year starting in 2008. The negotiations are set to start in the next two weeks. Morgan Stanley has forecast a 50% rise in iron ore prices for 2008 "to reflect an exceptionally tight market." Merrill Lynch and £Íacquarie bank have made similar projections, while JPMorgan predicts a rise of 25-30%. Mining companies are struggling to increase iron ore output in Australia, the world's biggest exporter, as the quality of Chinese iron ore has not improved.