The world’s largest mining group has warned embattled producers not to expect a rebound in iron ore prices.
BHP Billiton said that production increases by low-cost producers would kill any prospect of a China-inspired recovery in prices of one of the world’s most heavily traded commodities.
Iron ore has crashed from about $190 a tonne in 2011 to $54 a tonne yesterday, exerting pressure on high-cost producers and Australia’s federal budget. Arnoud Balhuizen, the president of BHP’s marketing division, said that present prices were in line with BHP’s forecasts.
“We’ll continue to see low-cost supply coming into the market — additional production from Australia and Brazil,” he said. “Our expectation is . . . we’ll continue to see high-cost iron ore leave the market.”
He said that recent turbulence in China were simply wobbles as its moves towards a more consumption-led economy and that there were no signs the economy was grinding to a halt.
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His views were echoed by a Rio Tinto executive. Jean-Sébastian Jacques, boss of its copper and coal division, said in a speech to the LME Week forum: “No one could have really forecast the extent of the slowdown in China but we knew at some time there would need to be a transition to what is now being referred to as the ‘new normal’.”
He pointed out that China was still forecast to grow at 7 per cent this year.