The boss of iron ore at Rio Tinto is remaining bullish on extended-term demand for the commodity regardless of its price tag threatening to plunge beneath $ 40.
The iron ore price is edging close to a drop into the $ 30 variety, hitting a fresh ten-year low of $ 40.70 nowadays.
But Rio Tinto iron ore chief executive Andrew Harding mentioned the price tag had not “fallen off a cliff”, but was rather reflecting its extended-term typical.
“In reality what we’ve noticed, instead of a cliff which implies a plateau of permanently higher rates and then suddenly it disappeared, we in fact climbed a hill gradually and we’ve run down the other side in recent years,” he said.
“So that’s what the history is like, it’s not saying we’ve fallen off a cliff.
“The market’s really operating how markets constantly do in any commodity, not just mining, supply will follow demand, it does not pace perfectly with demand … it’s often bumpy.”
Mr Harding was speaking at an occasion to a crowd of junior miners, which are feeling the heat of tumbling prices.
The organization, along with its rival BHP Billiton have been accused of driving down the cost by adding provide to an already gutted marketplace, but both businesses have denied the claim.
Chinese steel mill demand causing price fluctuation
Mr Harding said the brief-term price tag weakness is being triggered by the purchasing behaviour of Chinese steel mills.
“The restocking in China usually happens about this time of year, and that is not operating at the rate that folks would have expected,” he said.
“Medium to extended-term very great, but we will be in volatile times as supply and demand in the close to-term come towards a balance.”
“Lengthy term, which is what you happen to be actually interested in lengthy-life mining operations … what is the world going to be like 15, 20, 30 years out?”
BHP Billiton iron ore chief executive Jimmy Wilson agreed.
“The iron ore price these days, … we’ve said for a long period of time that the price curve will flatten and rates will go up and down,” Mr Wilson stated.
The predicament is far more testing for the smaller Fortescue Metals Group (FMG), which has a wafer-thin margin at existing costs.
“We will have some struggles for some time, and no-one’s a good predictor of the iron ore value,” FMG executive director Peter Meurs said.
Regardless of the difficult conditions, Rio has not ruled out giving the green light to new greenfields mine Silvergrass, which would have the capacity to generate 21 million tonnes of iron ore a year.
Mr Harding stated new mines had been committed to on their lengthy-term worth.
“When you develop a mine, you happen to be not creating it for the day, it’s a multi-decade commitment, so what you’re interested in is how the cash flows play out over the extended term,” he mentioned.
The board will make a final investment decision on the Silvergrass mine next year.
Subjects: iron-ore, wa