The iron-ore market throws up eye-catching numbers. Here are three: 100 million metric tons, $50 a ton or $8 billion.
The first is the amount being added to seaborne iron-ore supply this year by the biggest miners, according to Jefferies, equivalent to about 8% of the total market. The second is the result: The iron-ore price has dipped well below $50 a ton, down nearly 35% this year.
The final figure reflects the challenge’s scale. That drop implies a roughly $8 billion annual cash flow hit to Rio Tinto and BHP Billiton combined, if today’s price were the average for the year rather than at the end of December. Some factors, like exchange rates and a lower oil price, are favoring miners. But saving every cent is still the priority. One apocryphal story making the rounds has a mining chief objecting to high inventory levels in the office stationery closet. Another has a CEO ordering one office elevator be disabled to save on energy.
The latter apparently isn’t true. If iron ore keeps tumbling, though, taking the stairs may not be such a bad idea.
Source: The Wall Street journal
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