Low iron ore prices no surprise to Rio Tinto

Rio Tinto’s iron ore chief Andrew Harding says a $50-per-tonne-cfr-China price for the steelmaking raw material is no surprise.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

This is because such a price had always been the average since the mining major entered the iron ore business.

The prices recorded when the market peaked have historically been unsustainable, he said in a company publication released on Friday June 19.

Benchmark iron ore prices slumped to a record low of $47.08 per tonne cfr China in early April this year, although they have since recovered. Metal Bulletin’s 62% Fe Iron Ore Index stood at $61.77 per tonne on Thursday June 18.

Market sentiment remains gloomy amid sluggish Chinese steel demand and prices. New iron ore supply that is expected to come online later this year is also adding to the bearish outlook.

Harding, however, noted that “this is exactly the time when it pays to be at the bottom end of the cost curve”.

“At Rio Tinto, we can make money on every tonne we sell, and we can indeed sell every tonne. So we will continue to make maximum use of the infrastructure we have installed for our operations,” he said.

The miner’s historical data shows that its iron ore strategy “makes the most sense”, he added.

“If we continue to execute our strategy, we’ll be very successful.”

Harding’s comments came on the back of Fortescue Metals Group chairman Andrew Forrest’s remarks on iron ore production cuts.

Forrest had called for BHP Billiton and Rio Tinto to reduce their output to combat oversupply, a call that resulted in BHP defending its iron ore strategy repeatedly.

Harding believes high-cost producers will go out of business unless they can cut costs “dramatically”.

“We always expect there will be attempts by governments to provide relief to domestic producers, in the form of tax breaks for instance. But the impact of that is only likely to be very minor in the scheme of things and, in my estimation, will make no difference to the outcome,” he added.

Harding remains bullish over the long-term demand for iron ore from both developing and developed countries.

“There’s no doubt in my mind about the strong long-term outlook for iron ore, since its growth is intrinsically linked to population and quality of life,” he said.

What to read next
Any bolstering effect on US ferrous scrap exports from the up-month in February’s domestic trade will be tempered in the immediate aftermath of two earthquakes in Turkey — the country’s largest importing region — on Monday, February 6
Steel trading and production have come to a halt in the eastern Turkish region of Iskenderun following a devastating earthquake that hit the region on Monday February 6 and put mills in the area under force majeure, sources told Fastmarkets on Tuesday
A 120-day closure of four Illinois dams scheduled for 2023 will disrupt barge shipments and have potentially both negative and positive impacts on scrap and finished steel products from Canada to Texas
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.