BHP Billiton's iron ore push doesn't mean prices will rise
- Jul 22 2015 at 2:58 PM
- Updated Jul 22 2015 at 2:58 PM
http://www.copyright link/content/dam/images/g/h/s/f/2/6/image.related.afrArticleLead.620x350.gihz8w.png/1437541088867.jpg
Adjusting to the moveable feast of pricing is not what BHP's pedal-to-the-metal production rate is about. Tim Wimborne
http://www.copyright link/content/dam/images/1/4/1/p/m/x/image.imgtype.afrAuthorAvatar.120x120.png/1426111300689.png
by Matthew Stevens
The fact BHP Billiton has easily exceeded its full year iron ore production guidance should not be taken as a sign the Global Australian thinks prices are on the way up.
Given BHP does not publicly comment when it releases its quarterly reports, the best clue we can get as to where prices are heading is to refer back to comments made by iron ore president Jimmy Wilson in October.
Back then The Australian Financial Review asked him where we might expect the iron ore price to end up given the certainty that the market was headed into an extended period of over-supply.
Wilson advised us to study the cost curve, to identify the highest cost major producer and to work on the basis that future pricing would be set by the cost of its most marginal tonnes.
The candidates for the title of the marginal producer are Fortescue Metals Group and Brazil's iron ore monster Vale.
Right now, Vale is producing some ore at as much as $U60 a tonne - however it will replace some of them with super low-cost ore that will come out of its new S11D project. But across the year it is expected to produce about 340 million tonnes at an average cost of around $US43 each.
Fortescue has been pushing its costs down at a frenetic rate. It is planning to produce about 165 million tonnes this year and is driving to get to its break-even price of $US39 a tonne.
In other words, the price could well fall in the short to medium term from its current level of $US52. Indeed, Goldman Sachs said overnight on Tuesday that the price is heading down towards $US44 a tonne by the second quarter of calendar 2016 as the supply glut enters a second year.
But to be clear, adjusting to the moveable feast of pricing is not what BHP's pedal-to-the-metal production rate is about.
It's simply about running its massive iron ore machine as productively and profitably as it possibly can.
http://www.copyright link/business/...-doesnt-mean-prices-will-rise-20150722-gihz8w
- Forums
- ASX - By Stock
- FMG
- Iron Ore Price
Iron Ore Price, page-621
-
- There are more pages in this discussion • 19,437 more messages in this thread...
This thread is closed.
You may not reply to this discussion at this time.
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add FMG (ASX) to my watchlist
(20min delay)
|
|||||
Last
$17.50 |
Change
0.840(5.04%) |
Mkt cap ! $53.88B |
Open | High | Low | Value | Volume |
$16.89 | $17.74 | $16.84 | $346.2M | 19.88M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
3 | 5870 | $17.48 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$17.50 | 12148 | 3 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
2 | 5300 | 17.480 |
1 | 1000 | 17.460 |
1 | 6609 | 17.450 |
4 | 6819 | 17.400 |
1 | 2500 | 17.350 |
Price($) | Vol. | No. |
---|---|---|
17.500 | 148 | 1 |
17.560 | 3333 | 1 |
17.600 | 2600 | 1 |
17.670 | 1000 | 1 |
17.680 | 593 | 1 |
Last trade - 16.10pm 13/09/2024 (20 minute delay) ? |
Featured News
FMG (ASX) Chart |
The Watchlist
LPM
LITHIUM PLUS MINERALS LTD.
Simon Kidston, Non--Executive Director
Simon Kidston
Non--Executive Director
SPONSORED BY The Market Online