A forest of inconvenient truths on iron ore – by Matthew Stevens (Australian Financial Review – July 6, 2015)


Andrew Forrest may not like the idea much but there is a good chance that Australian iron ore will generate more national income over the next decade than it did through the 10 years of boom times that came so suddenly to a halt last November.

A report prepared for the Minerals Council of Australia (or Rio Tinto) by Port Jackson Partners predicts that the Pilbara’s powerful iron ore troika along with a subset of much smaller producers will sell $615 billion of iron ore between now and 2025.

That is 40 per cent more than the $430 billion of revenue that those same producers generated through 2005-14, the decade that was punctuated by peak iron ore pricing.

“Australia now has a 50 per cent share of the seaborne market, a share built on vastly expanded production volumes, which now exceed 650 million tonnes per year. This compares with 170 million tonnes in 2000. This will enable the industry to add more value to the Australian economy over the next decade than over the previous 10 years,” PJP predicts.

In normal circumstances, of course, this potential would bring nothing but joy for Forrest to contemplate. But, right now, it arrives at an inconvenient possible truth for an iron ore billionaire whose preferred narrative is one of crisis created by rapacious oversupply.

Forrest is said to be maintaining his rage over the state of the iron ore market. The chairman of Fortescue, like his executive, believes that his more muscular Pilbara competitors spent the back end of 2014 talking down the iron ore price to maximise their future market power.

The occasionally disjointed Forrest proposition is that the precipitous fall in the iron ore price through the final quarter of calendar 2014 was triggered by promises from management at both Rio Tinto and BHP Billiton that they would continue to run their expanded production platforms at capacity despite the certainty that the market would soon drift into oversupply.

For the rest of this article, click here: http://www.afr.com/business/mining/iron-ore/a-forest-of-inconvenient-truths-20150706-gi66ps