JOHANNESBURG (miningweekly.com) – Iron-ore prices will probably soften further in the short-term, says Kumba Iron Ore CEO Chris Griffith.
Griffith tells Mining Weekly Online in a video interview that there is currently more iron-ore supply than demand.
The spot price of iron-ore in China soared to an all-time record high of $180/t in September, but fell sharply in early November to $116/t before recovering in two weeks to $147/t and then falling again to the current $140/t.
“The price has come off, but it’s still a very strong price,” Griffith emphasises.
While he anticipates market softness in the “very short-term”, he is insistent that the medium-term and long-term fundamentals of the iron-ore industry remain “very, very sound”.
JSE-listed Kumba, an Anglo American group company, is not experiencing a big build up of stock and is selling virtually everything that it is able to produce.
“But we are seeing some concern with people wanting to stand back and watch to see what happens with prices,” he says.
Should oversupply continue, the bigger companies like Vale, BHP Billiton and Rio Tinto, may consider production cutbacks, as they did during the 2008 global economic crisis.
“But at the moment, we’re not seeing any cutbacks. All producers are producing flat-out, including ourselves,” Griffith adds to Mining Weekly Online.
Kumba’s new Kolomela iron-ore mine is scheduled for first production of four-million tons to five-million tons during the first half of 2012, ramping up to full capacity of nine-million tons for export in 2013.
“We’re still very happy with when Kolomela comes to the market,” he adds.
When buying slows, the stock of finished steel, washing machines, cars and construction material builds up, eventually hoisting the stock levels of iron-ore producers.
“That’s exactly what’s happening at the moment and when there’s more supply than demand, the price has to come down,” he adds.
The fourth quarter of the calendar year is normally a slower quarter because it is winter in Europe and cold in most of the northern hemisphere.