So steel to make MGs will be cheaper? SOURCE Daily Telegraph...
China has closed half its iron ore mines, says Rio Tinto
China may have closed down half of its iron ore mines since prices collapsed,
according to Anthony Loo, Rio Tinto's managing director for China.
By Garry White
Last Updated: 3:47PM BST 18 May 2009
Speaking at an economic conference in Hong Kong, Mr Loo said that China's
stimulus plan "remains the big driver for demand for steel" and
that the "Chinese economy had touched down."
He noted that China's steel mills may be restocking with iron ore while the
spot price remained low.
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There has also been speculation that this year's gains in the price of copper
were caused by Chinese restocking.
"Imports from lower-cost producers around the world have displaced
domestic production," Mr Loo said.
Reports from Chinese shipbrokers indicate that iron ore stocks at China's
major ports fell 2pc to 74m tonnes last week. This has been prompted by
steel mills pulling stocks into their warehouses ahead of the full impact of
China's economic stimulus plan.
Iron ore prices fell to a five-month low in April and are well below their
2008 peak. Major iron ore producers such as Rio Tinto and Brazil's Vale are
currently locked in contract talks with Chinese steel mills over pricing,
with some expecting cuts in iron ore benchmark prices of up to 40pc this
year.
Tom Gidley-Kitchin, mining analyst at Charles Stanley, said: "There are a
lot of marginal producers in China. What is interesting is that the Chinese
government isn't artificially keeping its own mines in business. As well as
it being counterproductive to keep unviable mines open in the current
pricing environment, this will also have the positive effect of reducing
China's trade surplus."
Last week, Mr Loo noted that iron ore prices had stabilised at a low level and
the market would favour the cheapest available supplies.
"Our production cost is probably the lowest in the world, or at least in
Australia. Therefore we are still competitive when the market is sluggish,"
said Mr Loo.
