[miningmx.com] — ANGLO American sees the long-term price of iron
ore “much higher’ than $80 per tonne, while existing supply-and-demand dynamics
will sustain the commodity’s prevailing higher prices longer than what markets have
anticipated.
Speaking at the official opening of Anglo subsidiary Kumba Iron Ore’s Kolomela mine
outside Postmasburg in the Northern Cape on Friday, Kumba CEO Chris Griffith said
earlier predictions that iron ore prices would be “falling off a cliff’ by 2013 already
seemed far-fetched. The spot price for benchmark 62% grade iron ore on Friday rose
to $137.40/tonne, according to Reuters.
“Three years ago some media and analysts told us there will be this wall of iron ore
coming to the market in 2013,’ said Griffith. “Our view was that prices would not be
falling down a cliff by 2013, while [prevailing] prices will be there for much longer.’
Griffith said new iron ore supply would not flood the market all at once. “The
transition from the [prevailing] highest price environment to the long-term price will
be in a much more gradual fashion,’ he said. “The reason is that these new projects
take so much longer to develop than what people anticipate; a number of these
projects are not going to be developed [at all].’
Anglo American CEO Cynthia Carroll said the company expected sustained growth in
emerging economies in the medium term, which will underpin robust demand for
commodities, to be supplemented by an early recovery in the US.
“We believe that medium-term replacement of infrastructure in the developed world
presents further opportunities for steel, with a bright future ahead for iron ore,’ she
said.
Griffith said he expected the long-term price of iron ore, following the “transition’,
to be significantly higher than $80/tonne.
“Two years ago people were talking about $60/tonne for a long term price,’ he said.
“I think the market is already sitting at [a consensus] of $80. Some market analysts
are now saying they expect a three-figure long-term price. We’re not at three
figures yet, but we’re much higher than $80/tonne.’
Carroll also said India presented a new market for iron ore producers over the
medium term, with the country expected to become a net importer in the next few
years.
“VOTE OF CONFIDENCE’
Earlier in the day, Carroll said the R8.5bn development of Kolomela was a “vote of
confidence’ in South Africa. The project was delivered in budget and dispatched its
first shipment to Saldanha in December; five months ahead of schedule.
The mine is still in ramp-up phase, with Griffith having committed to production of
between 4Mtpa and 5Mtpa for 2012. It is expected to reach full operating capacity of
9Mtpa by 2013.
The group is busy with concept studies to expand production from its Northern Cape
properties by another 15Mtpa, with pre-feasibility and feasibility studies scheduled
for 2013 and 2014 respectively.
