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.
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is producing two million tonnes per annum of high grade iron ore in the first phase of development, with expansion possibilities of greater than six million tonnes per annum of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”