[miningmx.com] – TIGHTER credit and labour shortages will thwart
miners’ plans to boost iron ore output, global miner Rio Tinto said on Tuesday, joining
other majors in playing down concerns the market would soon be oversupplied.
No.2 iron ore producer Rio said the world needed 100 million tonnes of new capacity a
year for the next eight years, 600 million tonnes to fill expected demand growth and
200 million to replace lost supply in the seaborne market as mines run down.
“Project delays are occurring because of a range of factors, such as tightened credit,
shortage of skilled workforce, longer lead times on major items, and the sheer weight
of pending approvals for new project development,” Sam Walsh, the head of Rio’s iron
ore unit, said at an industry conference in Beijing.
Walsh said financial institutions had tightened credit considerably amid troubles in the
euro zone, which meant banks were more willing to back majors in projects, but the
juniors “would find it very, very difficult.”
He added, “If you delve into the detailed expansion project announcements, you will
see quite clearly that all of the projects that have been announced haven’t come on in
the time frame they’ve announced.”
Rio, which is ramping up its iron ore production in Western Australia, said it was
confident of its own expansion plan and saw itself supplying a quarter of the 100
million tonnes per year of forecast new capacity.
Rio’s comments echo those of Brazilian miner Vale SA and Australia’s BHP Billiton Ltd,
who have warned rising costs were delaying greenfield projects and huge expansions
were needed to replace ageing mines.
Industry sources also told Reuters it was becoming harder for the mining minnows to
get financing from China, as investors were unwilling to pump millions into inferior
projects, especially those yielding poorer grades of ore.
These top three producers, which control around two-thirds of the 1-billion-tonne
global seaborne market, plan to ramp up output by more than 300 million tonnes over
the next three years.
Their ambitious expansion plans, along with those of junior miners eager to cash in on
the iron ore bonanza, have prompted some analysts to predict the seaborne market
will be oversupplied by 2014 or 2015.
Ian Roper, a commodities strategist at brokerage CLSA, said the industry had to hope
the millions of tonnes of announced capacity increases would not happen.
“If everyone did what they said they would, iron ore would be practically free,” he
said.
Separately, Rio’s Walsh also said iron ore prices were expected to remain volatile in
the next six months.
The price of the “rust-red gold” has slumped to around $140 a tonne from more than
$180 in September, according to Platts .
