Stable steel consumption has contributed to a recent rebound in iron ore prices, according to Cliffs Natural Resources CEO Lourenco Goncalves.
He presented Wednesday at the Goldman Sachs Global Metals and Mining Conference in New York, where he told the investors that demand, not the market, is driving prices. A constant domestic demand around 120 million tons is behind Goncalves projecting a $60 per ton price in 2017. “Things have been playing out the way we expected,” he said. “Iron ore is a commodity that can be controlled. Market control is not accurate.”
The biggest variable in the U.S. market for demand lately is illegally imported steel, a story that is old hat for mining companies across the region. Steel companies answered the question of how much imported steel was absorbed into the supply, Goncalves said, with four trade cases that led to high tariffs and the weeding out of foreign stock.
The percentage of domestic steel in the marketplace is still about 70 percent, and the goal is to get into the 80 percent range. But now the iron ore market is seeing price increases, which the CEO says will correct itself and level out in time.
“We were able to put a lot more discipline in the marketplace and my clients, the steel mills, were able to bring price back to where they belong,” he said. “Service centers overplayed their hand and took inventory levels artificially low … that will correct itself in time. Things have an equilibrium.”
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