banner

Mining iron
1433 Views

BHP, Rio iron ore output guidance cuts could boost prices


Some of the world’s biggest iron ore miners are slashing ambitious production targets, a move likely to restore balance to the commodity’s skewed fundamentals and fuel price gains ahead.

On Wednesday, BHP Billiton, the world’s third-largest producer,lowered its 2016 output guidance by 10 million tonnes. The news comes a day after number two producer Rio Tinto cut its 2017 forecast by 20 million tonnes and left its 2016 global shipments estimate unchanged at 350 million tonnes.

Weather-related issues were broadly at fault after a cyclone hit Western Australia’s iron ore mining belt, called the Pilbara, earlier this year. Stalled production at Samarco, a company joint-owned by BHP and Brazilian miner Vale, following a deadly dam collapse last year also weighed on BHP’s results while Rio’s performance was hampered by a delay in the deployment of its driverless train technology.

“This is quite positive for the spot price. As more major miners cut production, concerns about oversupply could finally be cooling down,” Angus Nicholson, market strategist at IG, said.

Make sure you get the best SA and international green economy stories delivered to you, as frequently as you like.

The price of iron ore, a key steel-making ingredient, dropped nearly 40 percent in 2015 on the back of an enormous supply glut, but the mineral substance has since recovered most of those losses. Year-to-date, iron ore is more than 40 percent higher, having recently breached the psychologically important $60 level, on the back of improved demand from China, reflected by a 6.5 percent rise of iron ore imports in the first three months of the year.

Beijing is channeling its massive monetary and fiscal resources to stimulate a nation experiencing its slowest pace of economic growth in over two decades—stimulus that has yielded a noticeable recovery in property investment, industrial production and fixed asset investment. Data last week showed all three indicators logging robust gains in the first quarter of the year.

Because these sectors consume massive amounts of industrial metals such steel, the commodity market benefits.

Here’s how to reach more than 20,000 subscribers that are interested in green economy content

With the added support of lower production from major miners, iron ore should be able to stay above $60 a tonne in the near-term, Nicholson said. Prices jumped to a six-week peak of $62.85 a tonne on Tuesday, according to the Metal Bulletin’s benchmark index.

“The price rise is sustainable. We probably will not see the lows of $30-$35 for a while and if we do see a correction, it would be a correction that I’d buy into,” said Jonathan Barratt, chief investment officer of Ayers Alliance Securities.

From a global supply-and-demand perspective, lower output targets were positive for the market because it created a sense of better balance, explained Shaw and Partners’ metals and mining analyst Peter O’Connor.

BHP and Rio’s combined lowered output will prevent 30 million tons of new supply from hitting the market. While that number may seem like a tiny drop in iron ore’s estimated 1.5 billion-tonne seaborne market, it could lead to a tighter market in 2017, O’Connor explained.

Another factor supporting the commodity’s price recovery was delayed spending on new projects, Nicholson noted. Rio has yet to make a investment in its Silvergrass mine in the Pilbara, which further limits the amount of new supply.

Expose your company to in excess of 3000 B2B delegates

Make sure you get the best SA and international green economy stories delivered to you, as frequently as you like.

Here’s how to reach more than 20,000 subscribers that are interested in green economy content

The best way to gather hundreds of qualified leads

Source: cnbc


Follow Alive2Green on Social Media
TwitterFacebookLinkedInGoogle +

Recently Published

a2g African Construction
»

Learning and Networking for the Construction Industry

The African Construction and Totally Concrete Expo returns to ...

a2g manufacturing Indaba
»

Developing New Manufacturers Advancement in machine learning and industrial innovations vital to boosting South Africa’s manufacturing sector.

 Following the 2008 financial crisis, which caused many industrial ...

Smart City
»

Smart Cities Redefining Property Developments

Some of South Africa’s biggest mixed-use developments are evolving ...

Landscaping
»

Changing Landscaping Habits – Cape Town’s Day Zero threat to change landscaping habits says Easigrass

As dam levels in the Western Cape hover at around 20 percent, the ...

Screen Shot 2018-03-29 at 10.23.43
»

GCIP-SA now part of TIA

The Global Cleantech Innovation Programme for SMMEs and Start-ups in ...

manu
»

Made in Africa: Building The Future of Manufacturing

The annual Manufacturing Indaba provides a platform for international ...

Utility Week
»

Expand your knowledge in over 40 conference sessions at African Utility Week and save money!

The largest group of power, energy and water professionals will ...

ProductivitySA
»

The 20th Anniversary Challenge of The Workplace Challenge

Vania Reyneke, Project Manager, The Green Economy Journal attended ...

a2g
»

Sustainability in building design has won Renée Minnaar of the University of Pretoria a place at 31st Corobrik Architectural Student of the Year Awards

Sustainable building demands architectural design that aims to ...