Thursday, July 16 2015

By Jane Goldsmith

Iron Ore 2015
Delegates at Iron Ore 2015 have heard the iron ore price will remain low for the remainder of 2015.

IRON ore analysts are forecasting at least another year of hardship and ‘bottoming’ prices for Australia’s iron ore miners, as finance, mines and petroleum minister Bill Marmion moves to reassure the industry of the government’s ongoing support.

Speaking at the opening of the collaborative CSIRO-AusIMM conference Iron Ore 2015, Mr Marmion called for a calm, co-operative approach to price volatility, after a torrid week on international commodity markets.

“We are behind you 110 per cent,” he said.

“In the face of international volatility, now more than ever is the time for a calm and measured approach and working side-by-side for the long-term benefit of all.”

The global iron ore market has suffered across the first half of 2015 with spot prices dipping as low as US$44.50 per tonne in early July.

Microeconomic advisory Metalytics managing director John Barkas said Australian industry could expect further difficulties in 2015, with Chinese demand expected to remain soft. This would be followed by a slight recovery, and then a price plateau into the medium term.

“[The] industry faces subdued but positive prospects. There’s no doubt that China’s steel production growth will now be a lot more gradual,” Mr Barkas said in his keynote address.

“Into the 2030s, China will experience a long plateauing and then a slight decline to levels that are more sustainable into the very long term.”

Mr Barkas also criticised the “ill-informed” justifications behind the iron ore price falls, emphasising the importance of the steel-making product to global economic health.

“What we see is a major change in the trend of iron ore pricing and given the importance the industry has to investors and governments in Australia, it’s not surprising that a price fall of this magnitude has attracted a lot of attention and commentary – some of which has been ill-informed or at least open-to-question,” he said.

“One ill-informed notion is that demand for iron ore is falling; another is that it’s normal for commodity prices, in real terms, to oscillate around a long-term average. There have also been questions that somehow the iron ore industry ‘got it wrong’; that iron ore is a ‘dinosaur’ commodity, past its prime.

“Iron ore is the fundamental raw material in steel-making. Steel is by far the world’s largest metals industry and over the long term, steel production can be well correlated with economic growth.

“There are no credible forecasts of long term negative economic growth across the world. China’s economic policy, as [its] economy matures, will be directed more towards stable growth [although] we can’t expect anymore huge stimulus-building packages.

“The iron ore industry faces challenges and a changing landscape, but that is always the way. We foresee subdued but positive prospects.”

Advertisement