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UPDATE 1-BHP sees no repeat of huge China steel supply/demand imbalance
September 19, 2012 / 3:11 AM / in 5 years

UPDATE 1-BHP sees no repeat of huge China steel supply/demand imbalance

* No repeat of iron ore scarcity pricing - BHP’s Calderon

* China to use more recycled steel after 2025, lowering prices

* Copper price will support new supply until 2025

CANBERRA, Sept 19 (Reuters) - BHP Billiton, the world’s biggest miner, said it does not expect a repeat of the “spectacular imbalance” between steel supply and demand in China that propelled iron ore prices to a record high last year.

Demand for iron ore is likely to grow at a slower pace than previously, BHP Billiton’s Alberto Calderon, chief executive of aluminium, nickel and corporate development, told an Australia resources conference in Canberra on Wednesday.

“We won’t see again this spectacular sort of imbalance between demand and supply that we have seen. But we still have many good years ahead of us.”

Iron ore peaked at over $190 a tonne last year, but plummeted to a three-year low of $86.70 earlier this month before scrambling back above $100.

“Demand will grow less for steel. And producers in general will be more prepared to satisfy that supply,” Calderon said.

“This doesn’t mean that the boom has ended. But it does mean that to expect that prices will continue to grow, or even stay at very high growth levels... you will do that at your our own peril.”


Australia’s official government forecaster on Tuesday said it expected contract prices for iron ore to be $126 per tonne through 2012 and $101 in 2013.

Calderon said copper fundamentals looked more sustainable.

“Prices over the long term will be set at levels high enough to incentivize investment in new supply.”

Australia has been counting on a pipeline of resource and energy projects worth $270 billion to prolong its remarkable run of 21 years without a recession.

But with prices for iron ore, coal and other resources under pressure, the prospects for proposed, but as yet uncommitted, projects worth around $200 billion have dimmed.

Earlier this month, BHP Billiton said it was closing a second loss-making coal mine in Australia, blaming high costs, weak prices and a strong Australian dollar for the decision.

The move follows BHP’s decision to defer more than $40 billion in projects, including a coking coal expansion and a $20 billion expansion of its Olympic Dam copper and uranium mine in South Australia.

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