BHP Billiton: No Way Iron Ore Hits $100/Ton Again
The days of iron ore prices riding the $100 a ton range are all but gone, says Australian miner BHP Billiton. The immediate future looks dim as the company is predicting a continued decline in steel consumption growth in China next year.
"I've learnt never to say never and there's always short-term variations, but I think that if you use basic economics … certainly $100 seems high," Jimmy Wilson, President of BHP’s iron ore said on Thursday.
"It's hard to see that significant bump that we've seen coming from China happen again."
Although BHP had previously said the Chinese steel production growth would simmer around three percent for the next 10 years, the company now foresees that number dwindling more than anticipated.
"Consumption growth is about 1.5 percent this year and slowing to between 0.5-1.5 percent next year - we see modest to marginal steel consumption growth," said general manager for marketing and iron ore Alan Chirgwin.
This is the slowest rate of growth since 1990.
"We're not predicting a sharp curtailment of exports but if it does happen … steel demand will still be there elsewhere," said BHP’s president of marketing, Mike Henry. "We're here today to celebrate the relationship with China and the business here but ultimately we're selling to global markets."
Last week BHP’s senior management group was in Shanghai to celebrate the company’s shipping of its one billionth ton of iron ore to China.
"It took nearly 30 years for BHP Billiton to ship 100 million tons of iron ore to China and then only 12 more years to reach the one billion ton milestone," said chief executive Andrew Mackenzie.
Iron ore has surged in recent weeks after China cut interest rates for the first time since 2012. That hasn’t stopped the drop in prices as iron ore fell to under $70 a ton for the first time in five years.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.