LONDON, Oct 14 (Reuters) – BHP Billiton, the world’s largest miner, was downbeat on Wednesday about iron ore prices as low-cost producers continue to swamp the market and as the intensity of China’s demand for the steel making raw material ebbs.
However, there were some positive signs on the economic outlook for top commodity consumer China, BHP officials told a briefing during the LME Week industry gathering.
A global glut and falling Chinese steel demand have dragged spot iron ore prices .IO62-CNI=SI 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.
“By the end of this year, there will be additional iron ore coming from Australia, from Brazil,” Arnoud Balhuizen, president of the group’s marketing unit, told a media briefing. “Our expectation is that the iron ore market cost curve will continue to flatten and continue to come under pressure.”
In China, while some state-owned iron ore mines continue to operate even though they are losing money, privately-owned mines have largely been closing down when they go into the red, he added.
“You’d be surprised how capitalism is making its way into China. If you own a mine in China, it’s a universal thing that you don’t like to lose money.”
A substantial driver of the decline in commodity prices this year has been the fear of a hard landing in China’s economy, but BHP sees glimmers of hope despite weak industrial production data, said Stacie Wu, vice president of market analysis in the marketing unit.
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