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BHPB and FMG sees more Chinese iron ore mines closing

World’s largest mining company BHP Billiton Ltd and Australia’s third-biggest iron ore producer Fortescue Metals Group Ltd said that expects China to cut more higher-cost domestic iron ore output as the biggest global producers flood the market with low-cost supply.

FMG said that the closure of more Chinese domestic iron ore production is inevitable, helping the market to rebalance. Fortescue also said increases in the quality of its iron ore and improving market conditions will bring its sales closer in line with benchmark prices.

BHP Billiton Ltd said “As Australia expands its ability to export more and more high-quality iron ore, the Chinese are producing less and less domestically.”

As prices dropped on increased supply, between 20 percent and 30 percent of the iron ore mines in China have closed down, according to the China Metallurgical Mining Enterprise Association. The Chinese market is becoming saturated with lower-cost imports from Australia and Brazil, Morgan Stanley said last month in a report, forecasting lower prices even as Chinese mines shut down.

Iron ore, which has slipped 27 percent this year, may trade between $90 a metric ton and $110 a ton this half on declining Chinese production, a pause in expansion export capacity and improving Chinese steel demand, according to Citigroup Inc. Prices probably will fall again in 2015, Citigroup said.

Miners including BHP, Rio Tinto Group and Vale SA are raising output and spurring a global glut of the steelmaking ingredient, which slumped into a bear market in March. 

Source – Reuters & Bloomberg


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