drop in io demand is good for umc, page-14

Bungy,

IMO Seems like Vale will/has reacted correctly by cutting production to insure the price will not drop significantly...IMO BHP and RIO should follow thier lead, as the down turn cycle would last longer, the longer supply meets demand. Vale would then be in a better position as Vale could/would fetch a better price for lower grade ore compared what BHP & RIO had been selling if for in the lower end of the cycle.


"We are not cutting production. We're in a position to invest throughout the cycle, and look at the long term when planning expansions," said a BHP spokeswoman.
BHP and Rio are two of the top three players in the global seaborne iron ore market, together with Vale, the largest by some distance with annual output of 325 million metric tons. Rio Tinto produced about 180 million tons of iron ore last financial year ending June 30, and BHP 112 million tons.
We are not making any changes to our iron ore output. We are watching the situation in China with interest, as (Rio Chief Executive) Tom Albanese made clear," a Rio Tinto spokesman said.
Rio has announced it's reviewing near-term capital expenditure in terms of scope and timeline for projects, but hasn't specified which commodity area are under review.
The miner has also suspended a drive to sell US$10 billion worth of assets, citing current market conditions. Sagging demand from steel mills prompted Vale to cut iron ore output by 30 million metric tons, or 9% of production.
Only two weeks ago, Vale said it would substantially boost its 2009 investment plan despite a souring global economic outlook, announcing an investment plan totaling US$14.2 billion, up 29% from US$11 billion this year.
Vale's cutback serves to further undermine the outlook for next year's iron ore contract price negotiations.
After years of consecutive price rises, and a near doubling for this year's benchmark price, many analysts expects iron ore to fall back.
In the latest assessment, UBS Friday forecast the contract price to fall 40% on the year.