Australia’s largest iron ore producers Rio Tinto and BHP Billiton have rounded on rival Fortescue Metals Group as they fend off accusations of flooding the market and hurting local producers.
Fortescue chief executive Nev Power in February publicly attacked Rio and BHP for increasing iron ore supplies while prices tumbled. But Rio Tinto’s iron ore boss Andrew Harding has hit back, blaming Fortescue for increasing the global glut of iron ore.
“Rio Tinto, of the top three suppliers out of Western Australia, is the third largest increaser of supply in the market and FMG are actually the largest,” Mr Harding told reporters at an industry conference in Perth.
His counterpart at BHP, Jimmy Wilson, also singled out Fortescue, the nation’s third biggest producer, for flooding the market.
“FMG is the most prolific grower,” he said.
“Who knows where FMG’s going to go to.”
The iron ore price fell 1.5 per cent to a six year low of $US58.58 a tonne on Monday, just days after China cut its annual economic growth forecast to seven per cent.
Fortescue’s Mr Power blames much of the price falls in the past year on BHP and Rio, accusing them of boosting supplies to a depressed iron ore market and hurting smaller Pilbara miners and government revenue.
But Mr Harding said he took no joy in the pain higher cost iron ore producers may be suffering. Rio intends to maintain its 20 per cent market share and expects iron ore demand to grow more slowly than steel demand in the short term, he said.
BHP’s Mr Wilson added that Gina Rinehart’s Roy Hill project would definitely deliver 55 million extra tonnes of iron ore in the years ahead, further boosting supply.
He said players from Australia and China had entered the iron ore market during a period of massive demand, but this was turning around and companies with the most significant advantages would last longest.
Meanwhile, Mr Harding confirmed Rio would shed hundreds of jobs in WA’s Pilbara as the miner pursues efficiency measures in the coming months.
BHP has also been shedding staff but the “lion’s share” of job cuts have now been completed and natural attrition would largely take care of any further planned reductions, Mr Wilson said.
Citigroup’s global head of iron ore Paul Lyons told the conference that iron ore prices will drop to $US55 per tonne in 2016, with the “floor price” of the steel making commodity hitting $US50.
“To move up to $US60 to $US70 will require a turn around in China’s property market which will require cuts to interest rates,” Mr Lyons said.
Still, Rio, BHP and Brazil’s Vale are continuing to expand production.