Atlas sees flat iron ore price through mid-2011

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2010

Atlas Iron is budgeting for flat iron ore market prices over the next 10 months, but still sees strong demand from China, chief executive David Flanagan said. Iron ore prices are down sharply since April on softening steel production in China, the world's top buyer of the raw steel making material. "We're market takers and effectively budgeting on the price staying flat for the rest of this financial year (ending June 30, 2010)," Mr Flanagan told Reuters.
The Steel Index 62 per cent iron ore benchmark has dropped to $US142.90, its weakest level since August 4 and is down 23 per cent from April's two-year peak.
Marius Kloppers, chief executive of Australia's second-largest iron ore producer, BHP Billiton Ltd, last week signalled a looming slowdown in global steel-making raw materials markets due to overproduction of steel.
Brazil's Vale , the world's largest iron ore miner, said last week it would be cutting ore charges by 10 per cent from October, following a drop in spot prices in China in the past months.
Mr Flanagan said if prices fall below $US100 a tonne, half the world's production -- including some domestic Chinese mines -- would become uncompetitive, and quickly reduce global supply.
"There's that elastic supply in China, the price comes down and they shut down, and the price goes up and they kick back in," he said.
Atlas is on track to be mining ore at an annual rate of six million tonnes a year by Christmas, more than than five times the rate in the last financial year as production rises at its Pardoo mine and a new lode called Wodgina, according to Mr Flanagan.
Both mines are in Australia's Pilbara iron belt, where Rio Tinto Ltd, BHP Billiton and Fortescue Metals Group Ltd also have operations.
"For our product we will get north of $US100 a tonne and that translates into about $100 a tonne FOB. This is based on cash operating costs of $45 a tonne, so we should still be making good money," Mr Flanagan said.
"Knowing what the results on price of excess supply or excess demand, really is a black art," Mr Flanagan said.
"What we've done is focus on having low operating costs and being able deliver iron ore into China for $US50 to $US55 a tonne," he said.
That puts Atlas at about the mid-point among the world's seabourne suppliers of ore.
"Fundamentally, because China is growing on such a large base, if growth was to slow, the metrics are still very good -- six per cent on a trillion dollar economy is worth more than 8 percent on a half-million dollar economy," Mr Flanagan said.

Source: Reuters