Rio Tinto Lowers Iron Ore Price Amid Soft Demand
Mining behemoth Rio Tinto is jumping on the bandwagon and lowering its iron ore price as surging supply and weak demand from Chinese steel mills continues.
The iron ore price dropped to $89 a ton on Tuesday – its lowest level since September 2012 – as concerns about too much supply sitting at Chinese ports weighed on the minds of investors. The UK Company is following fellow iron ore miner Fortescue Metals Group by discounting the price of its low-grade iron ore.
“Demand for low quality product is plummeting,” Tim Murray, managing partner of J Capital Research said. He mentioned that demand has been falling at the same time supply has been rising.
Rio Tinto told customers on Tuesday the discount for its low-grade product would be lifted from six percent to 13 percent from July 1, leaving it to receive roughly $73 a ton.
Earlier this year, Fortescue CEO Nev Powers moved to reassure investors in Hong Kong about the risks of falling iron ore prices on the company’s profitability and the threat posed by increased mining rivals in China. Fortescue Metal’s breakeven price for iron ore is around $75 a ton, which is similar to Rio Tinto.
According to Credit Suisse head of Australian equity sales Chris Mayne, the markdown on price is a result of high supply and low demand. “The heavy discounting is partly a reflection greater supply of lower grade ore and combined with lower supply of Chinese high grade ore to blend, which has caused the discount to revert back to what was seen prior to 2010 which is 10-20 per cent discount to 61 per cent grade ore rather than close to parity that the market has been used to over the last two 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.