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REFILE-UPDATE 1-Vale, Fortescue see iron ore prices holding up on China demand
September 25, 2013 / 10:18 AM / 4 years ago

REFILE-UPDATE 1-Vale, Fortescue see iron ore prices holding up on China demand

* Vale sees iron ore prices in range of $120-$130 in Q4

* Fortescue sees range of $110-$130 in medium term

* Brisk Chinese steel output shows no signs of abating-BHP

QINGDAO, China, Sept 25 (Reuters) - Global iron ore prices are expected to trade in a range just below current levels in the fourth quarter and beyond, miners Vale and Fortescue Metals Group said, reflecting optimism Chinese demand will stay resilient.

Jose Carlos Martins, executive director for ferrous and strategy at Brazil’s Vale, said demand growth in China, the world’s top iron ore consumer, was likely to moderate next year, but did not expect any big decline.

Speaking on the sidelines of an industry conference, he said that a recovery in the United States and Europe would create a “better environment for iron ore consumption outside of China” predicting a range of $120-$130 a tonne in the fourth quarter.

Martins said the expansion plans of the world’s biggest iron ore miner remained intact, with Vale planning to raise annual production capacity to 480 million tonnes by 2018 from 306 million tonnes this year.

Iron ore producers remain dependent on China, which imports around two-thirds of global seaborne supplies, but Chinese officials see slower growth in demand and a subsequent supply glut to force prices into a long-term decline in coming years.

Liu Xiaoliang, secretary general of the Metallurgical Mines’ Association of China, said the increase in supplies would drive prices down to around $100 per tonne by 2015, though that would in turn squeeze high-cost domestic producers out of the market.

Spot iron ore prices have fallen by nearly a third from a record near $200 a tonne in 2011, mirroring the slowdown in China after years of double-digit economic expansion.

The price stood at $132.70 a tonne on Tuesday, not far from the six-week low of $131.10 hit on Sept. 17.

While China has been talking down the prospects for growth in its already bloated steel sector, foreign iron ore miners have said that demand in China remains strong enough to justify their huge expansion plans.

“The most recent available numbers are indicating current annualized China production in the order of 780 million tonnes of crude steel with no signs of abating,” said Alan Chirgwin, marketing manager for iron ore with BHP Billiton.

BHP Billiton is on track to boost its annual iron ore production capacity to more than 200 million tonnes while bigger rival Rio Tinto has said the increase of its production capability to 360 million tonnes a year from an already expanded 290 million tonnes is underway.

But BHP believes that global commodities markets were being undermined by rising supplies of raw material and warned the outlook for steel demand in Asia was expected to moderate.

Still, BHP Chairman Jac Nasser said in the company’s fiscal 2013 annual report that it had “a positive outlook over the long term as the fundamentals of wealth creation, demographics and urbanisation continue to create demand for commodities across Asia and other markets.”

Neville Power, the chief executive of Australia’s Fortescue Metals Group, the world’s fourth-biggest iron ore supplier, also said that Chinese demand remained resilient.

“We see continued stability in iron ore prices as steel demand is still strong and there are not much stocks in the supply chain, so iron ore prices should be $110-$130 (per tonne) in the medium term,” he told reporters.

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