MINING giant Anglo American says iron ore prices are set to remain depressed for the rest of the year as growing supply exceeds demand that is being tempered by a fragile Chinese housing market.
But the outlook is better for coking coal, with the British miner’s Wollongong-born chief executive Mark Cutifani expecting contract prices to rise from six-year lows of $US120 a tonne and change the fortunes of the company’s metallurgical coal unit, where first-half profits fell 86 per cent.
Anglo released first-half earnings last night, reporting a $US2.9 billion ($3.08bn) profit, in line with expectations. Net debt of $US11.5bn was lower than forecasts of $US12bn because of lower capital expenditure.
Anglo is the first of the big miners to deliver its June-half profit report and the first to offer its assessment of the global markets, with Rio Tinto and BHP Billiton both having stopped giving their views on economics and fundamentals in quarterly production reports.
“Uncertainty is likely to persist for the balance of 2014, though there are some encouraging signs that activity is strengthening in our key markets,” Mr Cutifani said. “Over the long term, we expect new supply to be constrained and to see tightening market fundamentals and a recovery in price performance.”
On iron ore, which makes up less of Anglo’s portfolio than that of its Australian-listed rivals, Anglo said prices that had fallen 30 per cent to $US94 a tonne since the start of the year were unlikely to improve in the short term.
“Steel fundamentals remain under pressure. Although recent data points to a recovery in economic growth in China, the construction market continues to be fragile as concern persists over housing prices,” Anglo said.
“Iron ore prices are expected to remain around the current level as supply exceeds demand in the second six months (of the year), though restocking by steel mills and a slowdown in Chinese domestic iron ore production in winter is expected to support prices towards the end of the year.”
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