ANGLO Australian mining titan BHP Billiton expects coking coal to be more scarce than iron ore over the next decade given less supply growth in the former when compared to the latter steelmaking raw ingredient, the chief executive of BHP's ferrous and coal division said late yesterday. "We are more bearish about iron ore than coking coal,"
said Marcus Randolph during the annual World Steel Association conference. "Between now and 2020 there is going to be a lot more iron ore supply coming into the market than coking coal, and our expectation is that, of the two, the scarcer over that period of time will be coking coal."
He noted China hit an inflection point in terms of its own coking coal resources in 2008 and became a net importer starting in 2009 due to limited domestic supply and burgeoning steel demand in the Asian country.
The Chinese supply and demand scenario is forecast to result in a 5 per cent compounded annual growth rate for global sea-borne coking coal supply between 2010 and 2020 while global coking coal supply is forecast to rise by only 3 per cent during the same period.
The Bowen basin in northeast Australia, which accounts for about two-thirds of the world's sea-borne coking coal, is forecast to grow at a 6 per cent CAGR between 2010 and 2020 while China will grow at 2 per cent and Canada will grow at 12 per cent during the same period, according to Randolph's presentation.
The Bowen basin's growth has been hampered by transport infrastructure bottlenecks related to its ports, Mr Randolph said.
Meanwhile global sea borne iron ore is forecast to grow at a 5 per cent CAGR between 2010 and 2020, a slightly lower rate than the 8 per cent CAGR growth during the previous decade, but still above global iron ore supply CAGR of 4 per cent over the next decade.
The major growth areas in the next decade are Brazil with a 12 per cent CAGR, Australia at 15 per cent, Guinea at 49 per cent and India at a 3 per cent CAGR. The region around Chile and Peru is forecast to grow at a 34 per cent CAGR between 2010 and 2020, Mr Randolph's presentation showed.
Mr Randolph said iron ore prices remain high because "we can't produce enough to supply you". But as more supply comes onstream, prices will fall. He said prices will fall at a slow rate because of the large chunk of high cost production that now exists in the iron ore market.
Mr Randolph estimates 340 million tonnes of iron ore supply has been brought into operation over the last decade that isn't considered low cost.
Mr Randolph also said the company hasn't experienced any cancellations or order delays from Chinese customers.
