Rio Tinto chief Sam Walsh says depressed iron ore prices face sustained pressure over the next couple of years even as Gina Rinehart’s $10 billion Roy Hill project and an expansion by Brazil’s Vale force more higher-cost producers out of the market.
But Mr Walsh and his counterpart at BHP Billiton, Andrew Mackenzie, both say future Chinese steel demand is being underestimated by many forecasters not factoring in substantial regional exports from the Asian powerhouse.
“As you see the Vale and Roy Hill (iron ore) tonnes come on, that’s going to put on some pressure,” Mr Walsh told The Weekend Australian in Melbourne during the week.
“You are seeing this imbalance of supply and demand and I expect, probably for a couple of years, iron ore will go through an adjustment period, as will a range of commodities, including oil and gas and agricultural products.”
On Thursday night, benchmark iron ore prices monitored by Metal Bulletin fell US38c to a fresh 11-year low of $US40.75 as investments approved during the boom continue to push more iron ore on to the market amid continued slowing Chinese demand.
Hancock Prospecting’s soon-to-export Roy Hill project in Western Australia will add another 55 million tonnes a year to the market, while Vale’s giant S11D in Brazil will add 90 million tonnes. Iron ore prices are falling despite what Mr Walsh said was 120 million tonnes of capacity closures at higher-cost iron ore mines this year.
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