Australian miner Fortescue Metals has added its voice to those who say they will be unable to respond quickly to the likely deficit in the iron ore market, a consequence of the Vale dam collapse in Brazil this year in which at least 249 people were killed.
Andrew Forrest, founder and chairman of Fortescue Metals, told Bloomberg News in an interview that while his company was looking to increase iron ore production, it could not simply “turn up the dial” in short order. Diversified mining groups BHP and Rio Tinto have made similar comments regarding their ability to respond to the supply deficit in iron ore.
Iron ore is heading for the biggest quarterly advance since late 2017 as investors seek to gauge the consequences of the disruption in Brazil, with Citigroup warning the market has yet to see the full impact of the disaster as a looming mid-year crunch will spur a rally to $100 a ton, said Bloomberg News.
Vale halted production from its facilities in Brumadinho in Brazil’s Minas Gerais state where the disaster struck in January and has not been able to recover production sufficiently.
The iron ore deficit has been positive for Kumba Iron Ore, the Anglo American listed subsidiary. In July, it declared an interim dividend of R9.9bn on higher prices taking overall payouts to shareholders in 2019 to R13bn, including the end-2018 dividend.
Notwithstanding short-term supply factors, growth in China would keep demand intact for iron ore, said Forrest, who told Bloomberg News that reports of a slowing economy were deceiving as volumetric growth in China demand remained enormous. China’s economy would be as large as the US economy in less than 10 years, he said.
BHP said earlier this year that the medium- to long-term fundamentals for iron ore were good and could support the construction of 11 more mines in Australia’s Pilbara region over the next 50 to 100 years.
“There is good demand for iron ore and for good quality iron ore,” BHP’s Western Australia Iron Ore Asset President Edgar Basto told ABC radio on Friday in an article published by Bloomberg News. “We see the medium term and long term of the industry fundamentals are there,” said Basto.
Source: Mining Mx