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“Iron ore prices are likely to remain subdued over the short to medium term as low-cost supply continues to rise,” Jimmy Wilson, the miner’s president for iron ore, told delegates at the Global Iron Ore & Steel Forecast Conference 2015 in Perth on Tuesday March 10.
According Wilson’s presentation, which BHP posted on the Australian Securities Exchange, higher-cost supply, particularly in China, is responding to declining prices.
Chinese private mines’ operating rates are falling in tandem with iron ore prices, he pointed out.
BHP expects China’s crude steel production to peak at 1-1.1 billion tonnes in the mid-2020s and plateau through 2030, Wilson said.
But after 2030, he noted that global demand for iron ore is set to decline due to a growth in the availability of scrap.
Against that background, BHP is maintaining its focus on increasing productivity across its supply chain.
“Our goal is to be the lowest-cost supplier of iron ore to China.”
The miner aims to take its unit cash costs below $20 per tonne in the medium term and reduce its external expenditure by $1 billion by its 2017 financial year.
BHP produced 124 million tonnes of iron ore on a 100% basis in the six months to December 31, up 15% year-on-year. It is looking at achieving a total output of 245 million tonnes for the 2015 financial year ending June 30.
BHP Billiton is expecting the cost curve of iron ore to flatten as low-cost seaborne supply replaces high-cost materials.