SMALLER miners struggling to survive the slashing of the iron ore price need to take responsibility for their predicament and not blame others, says mining giant Rio Tinto.
And BHP Billiton (BHP) warned the iron ore market is likely to remain volatile, as it defended its decision to continue increasing production despite the market glut that’s dragged prices to multiyear lows.
Speaking at the Global Iron Ore and Steel Forecast conference in Perth, Rio Tinto (RIO) iron ore chief executive Andrew Harding said suggestions his company’s surge in output was behind the halving in ore prices over the past year were wide of the mark.
“I take no enjoyment out of the pain the high-cost producers may be suffering,” he said.
“The reality is that as prices come down, if you have made an investment with shareholder funds in a project that is not sustainable, that’s your responsibility.
“It’s the responsibility of the people who made that investment, not other people’s responsibility.”
Mr Harding told the conference he expects to see around 85 million tonnes of high-cost production exit the market on 2015, with a further 80 million tonnes of marginal supply at risk.
Balance sheet strength would be a key determinant in whether marginal suppliers remain in the market.
Rio Tinto, meanwhile, was pursuing efficiency measures and Mr Harding confirmed more jobs would be lost.
Smaller Australian miners such as Atlas Iron and BC Iron have been struggling for profitability in recent months. Atlas also has more than $200m in debt due to mature in the coming years.
Iron ore prices have halved over the past year as rising supply from new and expanded mines outpaces demand from steelmakers.
At $US58 a tonne, the commodity today traded at its lowest level since The Steel Index started publishing prices in 2008.
BHP Billiton’s iron ore boss Jimmy Wilson says market volatility is set to continue for now.
“Volatility is likely to persist over the short-term but recede as the cost curve continues to flatten,” Mr Wilson told the Perth conference.
BHP Billiton has continued to boost production despite the price downturn, and says earnings support its decision.
“The effectiveness of our approach is validated by our robust financial and operating results despite the challenging market conditions,” Mr Wilson said in a regulatory filing ahead of today’s Perth conference.
“For the first half of this financial year, the team has delivered a solid underlying earnings before interest and tax margin of 49 per cent, and a return on assets of 34 per cent,” he said.
Source: The Australian
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