SYDNEY, April 10 BHP Billiton
sees iron ore prices declining over the next couple of years as
it and rivals Rio Tinto and Fortescue Metals
Group make plans to boost output by 2015 while demand
from China tapers off.
The three miners plan to add a combined 235 million tonnes
of new mine capacity by 2015, a figure almost equivalent to
Rio's total output last year.
Purchases from China, the largest buyer of iron ore from
Australia, are expected to decline over the next few years as
the economic growth rates slow, BHP's Chief Financial Officer
Graham Kerr said.
"What you have seen over the last couple of years in China,
I don't expect the double digit growth rates to continue," Kerr
told the Bloomberg Australia Economic Summit in Sydney.
"Their moderated growth is around the 7 percent to 8 percent
mark for the next couple of years, then trending down toward the
6 percent mark."
China's economy grew 7.8 percent in 2012, its slackest pace
since 1999 rate, and the latest Thomson Reuters poll puts the
GDP growth rate at 8.1 percent for this year.
Iron ore sales account for around 65 percent of BHP's
revenue, Kerr said, adding that a decline in prices underscored
the need for Australian miners to operate from a low cost base.
Production costs under $40 a tonne mean iron ore margins at
BHP and Rio Tinto are comfortably above any of their other
businesses. Fortescue spends around $70 a tonne to mine and
freighter its ore to China.
Australian iron ore producers combined control more than
half the world's sea-borne traded iron ore flow, which is
nearing 1 billion tonnes a year.
China's iron ore imports grew 14.4 percent in March from the
previous month, but shipments were still at their second-lowest
in five months amid a tepid recovery in the country's appetite
Benchmark Asian spot iron ore prices reached
a 15-month high of $158.90 a tonne on Feb. 20 but have since
fallen to as low as $132.90 a tonne on March 14 as steel
manufacturers cut back on purchases. Prices closed on Tuesday at
$139.10 a tonne.
"There is nothing wrong with the demand side, it's the
supply side, UBS analyst Tom Price told the conference, adding
the bank was a "moderate bull" on iron ore over the next few