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.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.