QINGDAO, China, Sept 23 (Reuters) – Iron ore miner Vale said it will cut its production cost to less than $13 per tonne by 2018, as the world’s largest producer of the commodity maximises profit margins in an era of weak prices.
A global glut and falling Chinese steel demand have dragged iron ore prices to less than $60 a tonne from a high of nearly $200 in 2011. The price is forecast to drop to $50 over the next two years, a Reuters poll showed.
“Vale is progressing to reach the lowest cash cost of the industry and will be competitive at any price scenario,” Claudio Alves, global director of marketing and sales at Vale, told a conference in China’s port city of Qingdao.
The cost reduction will come after the completion of Vale’s 90-million-tonne expansion project known as S11D in the Brazilian Amazon, Alves said, as the miner focuses on producing more high-quality material.
Vale’s overall cost stood at $15.80 per tonne by the second quarter.
That compares with $16.20 for Rio Tinto Ltd and $17.01 for BHP Billiton Ltd for the first half of the year, and $22.16 for Fortescue Metals Group Ltd by the second quarter, said Alves, citing estimates from the miners’ latest profit reports.
BHP expects to reduce iron ore unit costs at its Western Australia operations by 21 percent to $16 per tonne in the 2016 financial year.
The end of the mining boom has forced Vale and its Australian rivals to focus on costs amid sliding iron ore prices.
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