The big fall in iron ore over the past 12 months is only a surprise to casual observers of Australia’s number one export, with BHP’s marketing guru saying that prices below $100 a tonne are the big Australian’s base case.
The AFR reports that Mike Henry said that any move in the price back over $100 would be short-lived due to the large supply increases and availability.
Could you see iron ore back up over $US100? For a short period of time, possibly, yes.
What I’m pretty confident about is that you are not going to see iron ore back above $US100 on a sustained basis going forward in real terms . . . Our view is that prices over the long run will be sub that sort of level. Is that baked into our plans? Absolutely, yes.
Henry also took aim at claims that BHP is directly targetting other producers or countries saying that “iron ore is fundamentally not a scarce resource,” and as a result BHP and Australia need to ask if they want to take advantage of the opportunity “or do we want to cede that to someone else – another country, another region, another company?”
So on that basis if Australia and BHP weren’t producing, someone else would be and as such the question is not if others are being shut out but rather if an opportunity is being missed.
He also added that BHP sees about 200 million tonnes being China’s long-run resource availability due to competitiveness either “because of inherently low mining costs, or because it is geographically proximate to demand, and therefore has less by way of transportation costs”.
So BHP and Austalia keeps producing in the knowledge that the big rise in price was not normal. Rather prices below $100 now are.
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