UBS on Thursday cut its realised price forecast for iron ore sold by BHP Billiton
The reduction for iron ore fines, grading 62 percent on an FOB basis, was given by UBS in a client note, and still leaves its forecast well-above current spot prices,
Platts' index for 62 percent iron ore was quoted at $120.25 per tonne, and The Steel Index for the same grade <.IO62-CNI=SI> stood at $120.40
Under the new forecast, UBS said its full-year earning per share forecasts for both companies would be reduced by between 3 and 4 percent.
Australian steel maker and iron ore miner Onesteel
UBS said it remains undaunted bulls on iron ore, despite the downgrading, saying fundamentals for strong demand were being supported by Chinese imports coupled with emerging constraints on Indian ore supplies for export.
India, the world's third-largest iron ore supplier, has been maintaining a tight grip on its mining and exports of the steelmaking raw material in its major producing regions.
It said it was anticipating spot iron ore prices to rise over the last two months of 2011.
In a period of rising spot prices, steel producers prefer to be on a quarterly pricing system, though when prices fall rapidly customers prefer to be on shorter pricing systems to benefit from the price of the day, UBS noted.
This has driven the move by some consumers in the market (mostly Chinese) to seek to move to shorter term pricing, it said.
Rio Tinto last week blamed softening prices on more spot sales by the larger Vale
Vale has dismissed the claim, saying prices were falling because of a production increase in Australia and changes in credit policy that prevented Chinese traders from borrowing against their inventories, which spurred many to sell off their iron stocks.
Rio Tinto is accelerating a plan to lift output by 50 percent to 333 million tonnes a year by 2015. BHP is aiming for a 37 percent rise in production to 220 million tonnes by around the same time.
Rio and BHP shares were each about 1 percent higher in mid-morning trading in an otherwise slightly negative market <.AXJO>
(Reporting by James Regan; Editing by Ed Davies)