Top Iron Miners’ Cash Juggernaut Set to Survive Price Crash – by David Stringer (Bloomberg News – March 13, 2017)

The world’s biggest iron ore miners will be able to withstand the expected plunge in prices because their race to cut production costs has dramatically lowered the industry’s margin pressure point, allowing them to keep fueling a cash juggernaut that’s revived the mining sector.

More than 90 percent of producers in the global seaborne market can generate profits at a benchmark price of $60 a metric ton, Adrian Doyle, a Sydney-based senior consultant at researcher CRU Group, said by phone. That compares with about 65 percent of suppliers able to avoid losses at the same price point three years ago, he said.

“There have been fantastic cost reductions in a lot of instances,” while producers have also been boosted by lower oil prices, Doyle said. “If we were thinking of a pressure point where we’d start to see a bit of stretching in the industry, previously it would’ve been around $60 a ton, now it’s closer to $50 a ton-to-$45 a ton to stress test everyone but the majors.”

Benchmark iron ore dropped under $90 a metric ton last week for the first time since Feb. 10 amid rising supply in the 1.4 billion-ton seaborne market and surging stockpiles in China. Ore with 62 percent content in Qingdao was at $88.26 a dry ton Monday, according to Metal Bulletin Ltd.

Prices rallied to $94.86 on Feb. 21, the highest since August 2014. Futures in Dalian surged 4.3 percent to 684.5 yuan a ton on Monday, the highest at close since March 3.

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