* Rio Tinto sees weaker iron prices in H2 2013
* Drop to coincide with easing Chinese steel growth
* Australians still expanding heavily despite outlook
By James Regan and Manolo Serapio Jr
PERTH, March 19 Australia's big iron ore miners
have cautioned that China can no longer be counted on for
unchecked opportunity, warning of volatile markets and softer
prices as growth in China's steel production slows.
The big miners are sticking to aggressive expansion plans to
feed Chinese demand for iron ore, even after the market was
rattled for much of last year by doubts over future demand from
Rio Tinto , BHP Billiton and
Fortescue Metals Group, the world's second, third and
fourth biggest iron ore miners behind Brazil's Vale,
plan to add a combined 235 million tonnes of new mine capacity
by 2015, nearly equal to Rio's total output in 2012.
"We're seeing steel demand growth slowing inevitably. That
is going to put downward pressure on iron ore prices," Greg
Lilleyman, Rio's head of Pilbara iron ore operations, told a
conference here on Tuesday.
"We're going to see downward pressure in the second half and
perhaps beyond, but we still see pretty strong prices," he
BHP's Tony Ottaviano, vice president of planning, said iron
ore prices would "remain volatile" as more supply hits the
market at a time of moderating Chinese demand.
Rio Tinto forecasts steel demand to grow by about 3 percent
a year for the next 5-10 years. This is well down on 10 percent
growth rates in 2009-2011.
Iron ore prices shed more than 9 percent last week as a drop
in Chinese buying fueled concerns that a hoped-for pickup in
construction activity was not occurring.
Benchmark 62-percent grade iron ore stood at
$134.60 a tonne on Tuesday, hovering just above a near
three-month low hit late last week, but still well up on a price
below $87 a tonne in September last year.
Citigroup forecast an average selling price for 2013 of $120
a tonne, but others are less bullish, with UBS suggesting iron
ore prices could tumble as low as $70 a tonne, although probably
not this year.
"We see short-term market volatility (in iron ore and steel)
as part of the process of Chinese economic development," said
David Woodall, director of operations for Fortescue.
"We would be delighted with a price of just $110-$130 a
tonne," he said.
Lilleyman said Rio was well advanced in its aim of boosting
iron ore output by about 15 percent this year to 290 million
tonnes, while a target of 360 million tonnes by 2015 was also on
"We certainly still forecast (China's) steel demand growth
over the next 5-10 years somewhere around 3 percent ...
essentially peaking around 2030 at around 1 billion tonnes," he
Steel demand in China stood at around 680 million tonnes in
2012, based on analyst and industry estimates. Crude steel
output reached a record 716.5 million tonnes.
Lilleyman said Rio Tinto, which derives more than two-thirds
of its revenue from iron ore, is counting on its rich ores and
low mining costs to provide hefty profit margins despite any
cyclical downturns in the market.
His confidence is rooted in economies of scale, which allows
Rio Tinto to mine iron ore for around $24 a tonne, compared with
around $30 for BHP and over $50 for Fortescue.