Global iron ore supplies are set to expand further as the world’s biggest producers press on with capacity expansions, raising shipments of the steel-making raw material into a market facing a record surplus and sinking prices.
Net supplies will increase about 60 million to 75 million metric tons in 2015, in line with a 75 million ton rise in 2014, as mine expansions in Australia and Brazil more than offset closures in China, according to Sanford C. Bernstein & Co. Morgan Stanley predicts a net rise of 63 million tons this year, with production expected to peak in September to October.
Rio Tinto Group and BHP Billiton Ltd. in Australia and Brazil’s Vale SA invested billions to raise low-cost output even as prices fell to a five-year low, seeking to boost sales and force less competitive rivals to close. The outlook for supply will be in focus on Tuesday as the heads of Rio and BHP’s iron ore units are set to speak at a conference in Perth, Australia. The gathering will also hear from Barry Fitzgerald, who’s leading this year’s opening of the Roy Hill mine in the Pilbara.
The “main reason for price declines would be the continued push of the majors into a demand environment that does not need the tons,” Paul Gait, a London-based analyst at Bernstein said.
Source: Bloomberg