we're iron ore bulls, says arrium's ceo

We're iron ore bulls, says Arrium's new CEO Andrew Roberts

• by: Matt Chambers
• From: The Australian
• July 11, 2013 3:46PM

ARRIUM'S new chief executive says the steelmaker and miner is optimistic about the prospects for iron ore prices because of obstacles to the new supply that many analysts predict will flood the market.

“Some commentators are very bearish on iron ore .... we're not,'' Arrium chief Andrew Roberts said after a speech to a Melbourne Mining Club lunch, his first public outing in his new position at the company formerly known as OneSteel.
Arrium, which is planning to expand its South Australian iron ore mines to be able to export 12 million tonnes of iron ore a year, is highly leveraged to prices of the steelmaking raw material, meaning downbeat views of prices are weighing on its stock.

“There is continued strong growth in China, and while longer term growth rates are expected to subside, this would still leave demand for iron ore at high levels,'' Mr Roberts said in his presentation.
He said some forecasters believed capacity growth would outstrip demand in the next few years but that this did not give enough weight to the potential for projects to be delayed, export restrictions in India and closure of high-cost iron ore production in China, all of which could buoy prices.

“Historically, people have generally underestimated demand growth and overestimated the rate of supply coming on,'' he said.

Morgan Stanley analyst Joel Crane said today that Chinese steel production was “cranking”, with production now running at an annual rate of 796 million tonnes, compared with total production of 711 million tonnes in 2012. This is helping the Tianjin iron ore price, up 12 per cent since May 31. Iron ore imported through the northeast Chinese port of Tianjin yesterday rose US20 cents, or 0.2 per cent, to $US123.90.

Mr Crane doesn’t expect any “flash crash” in the iron ore price this year as happened to the iron ore price last year when it fell to about $US86 a tonne. In the second half of this year he forecasts the spot iron ore price will average $US125 a tonne. In 2014 it will be $US117 a tonne, he said.
Arrium's former chief executive Geoff Plummer eased OneSteel's dependence on its Whyalla steelworks by diversifying into iron ore exports and the ball bearings used to grind ore in mining plants.