The state’s two biggest mining companies have downplayed the recent dive in the iron ore price, insisting the outlook is still positive despite analysts tipping a continued fall to around $US80 per tonne.
The state’s two biggest mining companies have downplayed the recent dive in the iron ore price, insisting the outlook is still positive despite analysts tipping a continued fall to around $US80 per tonne.
“I don’t see this as a down cycle,” BHP Billiton president iron ore Jimmy Wilson told a media briefing today outside the AJM global iron ore and steel forecast conference.
“Our views to the long term are still very robust.”
When asked about forecasts the iron ore benchmark price was heading for $US80 per tonne, Mr Wilson said “80 feels a little low”.
In a similar vein, Rio Tinto Iron Ore chief executive Andrew Harding told the conference “the longer term (outlook) is still intact”.
"There will be short term volatility, proof of which you are seeing this week."
Their comments follow a sharp fall overnight in the benchmark iron ore price to $US104.70/t, down from $US116.90/t last Friday and about $US124/t in mid-February.
Iron ore miners have previously argued the commodity’s price will average around $US120/t, but that is at odds with analysts who see a significant decline over the next few years.
Citi Research commodities strategist Ivan Szpakowski told the conference the price would fall, the only question was by how much.
Citi expects the price to fall to around $US80/t by 2016 and to stay around that level for the next few years.
Mr Szpakowski acknowledged that China’s urbanisation would continue to be a growth driver but said real estate and infrastructure spending would not be as strong as in recent years.
Central government efforts to control the ‘shadow banking’ sector and rein-in local government debt would constrain economic growth and investment, as would a national effort to improve air quality.
He attributed the price dip over the past few days to a bond default in China, weak trade data from China and a build-up of iron ore stockpiles, flowing from the lack of cyclones in the Pilbara and very strong export volumes out of the region.
Mr Harding told the conference that the short-term price volatility did not change Rio’s positive long-term outlook, nor would it change the miner’s growth strategy.
He said China would not be alone in driving demand, with the ASEAN countries, India and the Middle East likely to develop as iron ore markets.
The conference was told that China's efforts to improve air quality would result in higher quality ores attracting an inceasing premium.
"Higher standards in air quality control is likely to drive demand for higher grade iron ore products, both lump and pellet and higher grade fines," Mr Harding said.
"Low grade iron ore with high impurities will come under pressure."
Mr Wilson said high grade lump ore was attracting a $US18/t premium currently.
