Rio Tinto CEO Mr Sam Walsh upbeat on price rebound to USD 100 levels
The Australian reported that Mr Sam Walsh CEO of Rio Tinto said that iron ore prices are likely to stabilise at above USD 100 per tonne and that analysts forecasting sustained USD 80 prices are being too pessimistic.
Mr Walsh said that “One third slump in prices this year was unlikely to be sustained because lower prices would see unprofitable mines shut down. When we saw prices around USD 80 a year and a half ago, we saw a number of people come out of the market; domestic supply in China, Africa and some in Australia. I think USD 80 is too low. I suspect a level north of USD 100 is probably more realistic.”
Mr Walsh said that “If iron ore prices continue to fall, Rio’s mines, which have cash costs of about USD 20 a tonne, meant the company would be fine. I don’t think we’re going to go down to USD 80 or else a lot of my friendly competitors are going to disappear.”
The comments are in line with those of Mr Andrew Forrest chairman of Fortescue Metals, Mr Ryan Stokes executive director of Seven Group Holdings and Mr Andrew Michelmore chief of MMG at the Australia in China’s Century conference in Melbourne last week, when they said slumping iron ore prices were unlikely to be sustained. But they are at odds with many analysts and fund managers, who believe steadily increasing supply from Rio, Fortescue and BHP Billiton will not be soaked up by the market and will weigh on prices. Mr Mark Pervan commodity research head of ANZ said that “Sentiment is particularly negative with weak cyclic factors (rising supply and falling demand) coinciding with weak structural developments (crackdown on inefficient high cost iron ore and steel capacity) to fuel heavy shorting activity. The market has overreacted, as it often has in the past, but picking the bottom is like catching a falling knife as speculators take over the market.”
Source - The Australian.com