BHP Billiton, Rio Tinto: Iron ore prices fall near five-year lows

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IRON ore prices risk sliding to the lowest level since 2009 as increased supplies from Australia and Brazil boost a global surplus and prompt the closure of higher-cost Chinese suppliers. Prices have tumbled 33 percent this year as mining firms from BHP Billiton to Rio Tinto increased output, pushing the global seaborne market into a glut. The commodity might retreat to $80 (R856) a ton this year, said Helen Lau, an analyst at UOB Kay Hian. Ore with 62 percent content in China fell 0.3 percent to $90.07 a ton on Monday, Metal Bulletin said. That’s near this year’s low of $89.48 on June 16, which was the lowest price since September 2012. A price of less than $88.08 would be the lowest since October 2009. Major producers in Australia, with average costs of $40 to $50 a ton, were continuing to boost supplies even with prices near five-year lows, Australia & New Zealand Banking Group said yesterday. Global seaborne output will exceed demand by 72 million tons this year and 175 million tons next year, Goldman Sachs estimates. China’s economy, which accounts for 67 percent of seaborne demand, will probably grow this year at the weakest pace since 1990. Rio Tinto plans to boost output 11 percent this year to 295 million tons, and estimates output of 330 million tons from next year. BHP Billliton said output from its Western Australian mines would rise to 245 million tons in the 12 months to June 2015. “The major iron ore players are determined to crowd out smaller, higher-cost producers,” analyst Gavin Wendt at Mine Life said. “Rising production will also… offset falling prices for these companies, as their margins remain strong.” – Bloomberg

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