More firms are reducing iron ore production
Global cutbacks now total 30 million metric tons
By Tom Stundza -- Purchasing, 11/10/2008 2:38:00 PM
Australian miners Rio Tinto and Fortescue Metals have both slashed iron ore production by 10% amid an increasingly weak market for the steelmaking material.
The Age, an online Australian newspaper, says this morning that Rio now expects to ship 170 million to 175 million metric tons of iron ore this year, down from earlier expectations of about 195 million metric tons. Fortescue Metals has lowered its annual production target by 2 million metric tons. Earlier, Brazilian rival Vale cut its iron ore production by 10%, or 30 million metric tons. Upshot: About 50 million metric tons of iron ore has been removed from the 2008 market.
Last week it was reported that the CEO of Vale said the company is unlikely to start 2009-contract price negotiations with steel mills until normal demand for ore returns. Purchasing.com also has reported that the big iron-ore miners expect pressure from the world's steelmakers for significant price cut--20% to 40% less than this year's levels--when supply contract negotiations open.
The Age today reports says BHP Billiton, the world's third-largest iron ore producer behind Vale and Rio, won't follow its rivals in reducing iron ore output. Reason: BHP last week received a so-called statement of objections' from the European competition regulator in reference to its bid for Rio and now would be an inopportune time for it to attempt to exercise any control over iron ore pricing.
Steel prices have collapsed in recent months along with demand as the global financial crisis has strangled growth prospects and developed economies face what some say could be their first full-year recession since World War II.
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