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    China Business
     Dec 17, 2005
China metals boom to continue

MELBOURNE - Australian Treasurer Peter Costello has said China will continue to drive high prices for base metals, but prices will fall as new supply comes online.

Mr Costello feels that the overall China-driven commodities boom will continue for some time, but that prices will eventually ease. "I believe that the rise of China will go on for some time and I believe



that, therefore, prices will be stronger for some time, but I don't believe they will be record prices for some time," he said.

Costello added that countries like Brazil, Argentina and Indonesia were already moving to boost their production of iron ore and other base metals, and the increase in supply would see prices normalize over time. "This is why we have got to beat the field - this is why we've got to increase our capacity and get into these markets while the going is good," he said.

Mr Costello said work was under way to clear infrastructure bottlenecks that were limiting Australia's supply capabilities and, during the course of this financial year, Australian miners would be able to take full advantage of high commodity prices.

The federal government's Mid-Year Economic and Fiscal Outlook (MYEFO) report released today forecasts Australia's terms of trade will increase by 9.5% in 2005/06, largely thanks to coal and iron ore export prices. The report said massive increases in iron ore and coking coal contract prices won earlier this year had already begun to have an impact on the terms of trade.

It said these prices were expected to stabilize in the fresh round of contract negotiations currently under way, but noted there was uncertainty about the forecast. The report said growth in China had been stronger than expected and that, while Chinese growth was still forecast to slow, the timing of the slowdown had been pushed further into the future.

(Asia Pulse)

 

 
 



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