The biggest iron ore producer in the U.S. says its larger rivals in Australia are hurting themselves as well as their competitors as they ramp-up production in an oversupplied market.
With iron ore slumping to less than $50 a metric ton, revenues at the biggest miners are shrinking faster than costs, according to the head of Cliffs Natural Resources Inc., who said the majors’ expectations that rivals will quit the market aren’t being fully realized.
“Prices below $50 are not comfortable to anyone, including the majors,” Chief Executive Officer Lourenco Goncalves said in a phone interview from the company’s headquarters in Cleveland, Ohio on Tuesday. “The cost-cutting is not even close to offset their loss in revenues. My entire point: the loss in revenue, totally avoidable. Self-imposed. Self-inflicted.”
BHP Billiton Ltd. spokeswoman Emily Perry said on Wednesday the company wouldn’t respond to Goncalves’s remarks, while Rio Tinto Group sent comments from Brendan Pearson, head of the Minerals Council of Australia, which represents miners. There is open competition in the iron ore market and the Cliffs’ CEO shouldn’t be taken seriously, Pearson said.
Iron ore sank below $50 last week on expanded low-cost production from Rio, BHP Billiton and Brazil’s Vale SA, coupled with signs demand in China is contracting. The biggest producers are raising output as prices sag, betting that they can pare costs per ton and boost market share while less efficient miners face closure. Iron ore will decline gradually for years to come, Alan Chirgwin, BHP’s vice president of marketing for iron ore, has forecast.
For the rest of this article, click here: http://www.bloomberg.com/news/articles/2015-11-04/cliffs-ceo-says-rio-bhp-in-imaginary-world-as-iron-ore-slumps