A commodities expert says some Northern Territory iron ore producers may be struggling to stay afloat, despite a stable iron price because they are too small.
The price of iron ore is sitting around $96 dollars a tonne, down from around $130 in January.
Mark Pervan, the head of commodity research at ANZ, says that price is actually considered good by larger producers in the Pilbara, but not for junior miners.
"The big producers are well established and have sunk huge infrastructure costs into that part of the world so they now operate at very efficient levels," Mr Pervan said.
"Producers in the Pilbara might be comfortable with an $80 to $90 dollar per tonne iron ore price.
"But the [West Australian] Mid West and Northern Territory producers, and include the South Australia producers here as well, may require prices closer to $100 per tonne," he said.
Last week Sherwin Iron, east of Mataranka in the Northern Territory, announced it was going into voluntary administration.
Meanwhile residents of Pine Creek, south of Darwin, have been told the Frances Creek iron ore mine will be scaled back, costing hundreds of people their jobs.
And on the West Australia-Northern Territory border, the company KMG has laid off staff from its Ridges iron ore project.
Mr Pervan says the current problem for smaller producers may stem from China and a lack of demand.
"It's a timing issue, there's really too much iron ore coming at a time when demand is quite weak at the moment," he said.
"There's a perception that the Chinese Government will remain a strong stance on trying to curb steal capacity in China."
Mr Pervan says smaller iron ore producers can stay afloat by having close relationships with their overseas buyers, until the price increases.
"The dynamic I’m hearing and seeing is that the Chinese are running out of iron ore, they will become more dependent on imports of iron ore going forward," he said.
"The urgency in China is getting greater and this is the feedback I’m getting when I'm in China."
Mr Pervan says emerging iron ore miners also need Chinese investment to become more economically viable.
"We need to make sure the sovereign backdrop here is attractive to these investors because they have got the wallet, and are looking to invest and have got the appetite," he said
"We saw it in the 1960’s and 1970’s with the Japanese in developing these large tier one efforts in the Pilbara, but we just haven’t got the appetite from the Chinese yet."
Mr Pervan expects the price will peak around $110 per tonne later this year and stay around that figure for most of 2015.
Source: ABC
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