Robots Will Help Iron-Ore Miners Survive Price Rout – by Luzi-Ann Javier (Bloomberg News – September 10, 2015)

When the rout in prices ends for the world’s iron-ore producers, those left standing probably will have more robots on their side.

Automated drills and driver-less trucks are among the new tools employed by the four biggest companies, including BHP Billiton Ltd., in a bid to preserve profit margins during a bear market that began more than two years ago. Using more technology helped reduce costs at Rio Tinto Plc by 8 percent since 2013, even as it boosted output by 5 percent, according to Paul Young, an analyst at Deutsche Bank AG in Sydney.

Improvements by top producers is defying a productivity collapse for the rest of the mining industry, which consultant McKinsey & Co. says declined as much as 28 percent in the past decade, forcing smaller operators to shut.

With demand for iron-ore slowing in China, the world’s biggest user, prices are probably headed lower as major suppliers expand output by tapping low-cost reserves, mostly in Australia, according to Citigroup Inc. The top four companies will see their share of the global market jump to 79 percent in 2018 from 64 percent in 2010, the bank said.

“Higher productivity is certainly an advantage” because those companies “would be the last ones to shut down in a low-price environment,” said Jessica Fung, an analyst at BMO Capital Markets in Toronto.

Price Slump

The benchmark price of iron ore imported by China has plunged 69 percent from a peak of $191.70 a metric ton in February 2011 to $59.01 on Thursday, heading for a third straight annual loss, according to Metal Bulletin. Iron-ore futures on the Dalian Commodity Exchange have dropped about 19 percent this year.

Even with the decline, top producers remain profitable. The cash cost of mining the ore on average is $15.80 a ton at Vale SA, $16 for BHP, and $16.20 at Rio Tinto, according to company data compiled by Bloomberg Intelligence.

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