SYDNEY (AFP) – The world’s biggest miner BHP Billiton says iron ore prices are unlikely to rise above US$100 a tonne again as the commodity trades at five-year lows amid a supply glut and weak Chinese demand.
Iron ore prices have slumped some 40 per cent this year as output from resources giants such as BHP, Rio Tinto and Brazilian mining powerhouse Vale increases, hurting higher-cost producers.
A year ago, iron ore fetched about US$135 a tonne, but it is now below US$70.
“I’ve learnt never to say never, and I think that there’s… always short-term variations,” the miner’s iron ore chief Jimmy Wilson told reporters late Thursday.
“But, you know, I think that if you use basic economics and look at inducement pricing… certainly, you know, US$100 feels high going forward.
“It’s hard to see the sort of significant bump that we’ve seen come from China happen again.”
The comments came as BHP marked the Anglo-Australian firm’s shipment of its one billionth tonne of iron ore to China. BHP shipped its first iron ore from Port Hedland in Western Australia to China in 1973.
Alan Chirgwin, BHP’s general manager for iron ore marketing, said the company expected China’s growth in consumption of steel – in which iron ore is a crucial component – to slow to 0.5 to 1.5 per cent next year.
The company also forecast Chinese economic growth to be around 7.0 per cent for a period of time before falling towards 6.0 percent in the next decade or so.
BHP’s comments came a day after fellow mining giant Rio Tinto said the iron ore price had fallen lower than the company and the industry had expected.
“Is it lower than where I thought it would be right now? Well I don’t try and predict where it is near-term but it is probably lower than where I think anyone saw it would be immediately,” Rio chief financial officer Chris Lynch told the Australian Financial Review.
“But you could also say the same is true for oil – and coal probably.”