RIO Tinto iron ore boss Andrew Harding says iron ore prices will remain strong for at least another 10 to 15 years, declaring he pays no attention to short-term fluctuations in the price of the key export commodity.
Speaking at the In the Zone conference at the University of Western Australia, a bullish Mr Harding said the most important indicator for iron ore was the rate of urbanisation in China, which buys 60 per cent of the world’s seaborne iron ore.
With the iron ore price slipping to $US105.40 ($113.53) yesterday — a 20-month low — and prompting a sharp fall in iron ore miners’ shares, some analysts have forecast a return to prices well below $US100 in coming months as increased supply hits the market and Chinese economic growth slows.
That would hit the profits of Rio and its Pilbara iron ore rivals BHP Billiton and Fortescue Metals Group. It would also eat into the coffers of the cash-strapped federal and West Australian governments.
The three big iron ore miners have pulled back on their future expansion plans, preferring to preserve cash and boost productivity rather than commit to multi-billion-dollar greenfields projects.
But the mood at yesterday’s conference — which brings together leaders and strategic thinkers from across the region — was largely confident about the long-term outlook for Australia’s resources sector and demand from Asia.
Mr Harding said he believed urbanisation in China would continue to fuel demand for steel needed for building key infrastructure in Chinese cities, predicting this would continue until at least the mid-2020s or even the late 2020s.
“The long-term indicator that I watch, that will be good for at least another decade, is the urbanisation in China,” he said.
“The key indicator is … how many millions of people are moving out of rural poverty into urbanised environments.”
Macquarie Bank’s chairman in Western Australia, Mark Barnaba, said he believed global supply of iron ore was still catching up with demand and Macquarie was “bullish” on the outlook for prices.
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