Movement in the price of iron ore to 30 dollars threatens the largest mining companies in the world, as prices approach marginal cost of the most expensive their operations, analyze John Kovacs of Capital Economics Ltd. He estimated that production goes to zero at prices from 28 to 39 dollars, taking into account transport costs and other related production costs.
Vale, Rio and BHP protect their strategies. CEO of the Rio for iron ore and Australia’s Andrew Harding said in November that if the company cut production volumes will be filled by less efficient competitors.
CFO of Vale Luciano Sianni said last week that the company will continue to reduce the marginal cost to be able to generate cash flows regardless of where they end up the price of ore.
However, the market demand increases. Roy Hill mine of billionaire Gina Reinhart began deliveries in Australia on Thursday as cargo now to steel mini Posco of South Korea. The manufacturer says that nearly 90% of planned production, which could reach 55 mln. Tons a year, agreed to long-term agreements and will have no direct pressure on prices.