OREANDA-NEWS. August 1, 2012. Spot iron ore prices are expected to reverse to an upward trend soon, as current levels approach the limit of output costs for several producers, a Vale top executive said. "I believe the recovery will happen soon," Jose Carlos Martins, the Brazilian miner's director of iron ore and strategy, said.

"It's not that miners will shut down [but] at these current levels many producers decrease production and start to stockpile material waiting for higher prices," he explained during a conference call.

This week, Metal Bulletin's Iron Ore Index (MBIO), which evaluates 62% Fe iron ore on a cfr China basis, fell below USD 120 per tonne for the first time since November last year.

It dropped to USD 118.64 per tonne cfr on Thursday July 26.

Martins noted that the last two occasions prices fell below USD 120 per tonne, they started to increase immediately afterwards.

This happened in the second half of 2010 and in the second half of 2011.

"Iron ore prices are reaching the bottom. These prices may stabilise or even see a slight recovery within two to three weeks," Martins said.

In the next two to three years, prices should vary between USD 120 and USD 180 per tonne, he added.

The reason for the imminent change in direction in the prices is an expected rebound in China, albeit a small one, he said.

"We are moderately optimistic about China. The country may show a 'timid'rebound in the second half of 2012 both in prices and demand," Martins added.