Rio Tinto, BHP Billiton insisted on cuts

Rio Tinto, BHP Billiton insisted on cuts
America's largest iron ore producer: Rio Tinto, BHP Billiton they are dreaming?
Australian iron ore giant ignore excess supply continues to increase while the behavior of a competitor was to blame.
CEO Lourenco Goncalves America's largest iron ore producer Cliffs Natural Resources, said iron ore prices fell to less than $ 50 per ton, large mining enterprises revenue decline faster than cost reduction. Industry giants continue to increase in the case of excess supply, but also a competitor out of the market did not reach the goal.
Bloomberg quoted Goncalves said the iron ore price is less than $ 50 for anyone not good news, including industry giants. Cost reduction is not enough to offset the decline in their revenues. He said:
My view is clear: the loss of revenue could have been avoided, is self-inflicted.
In their imaginary world, this year there will be 60 million tons production capacity from the market disappear, next year there will be 125 million tons of production capacity exit. But is not the case, everyone down costs, are trying to solve the problem, and not much production capacity from the market disappear.
Bloomberg quoted BHP Billiton spokesperson Emily Perry said the company declined to comment on the remarks Goncalves.
Rio Tinto by Australian Mineral Association (Minerals Councilof Australia) Leader Brendan Pearson commented that the iron ore market competition is open, if it makes Goncalves unhappy, he could have quit.
Last week, Rio Tinto, BHP Billiton and Brazil's Vale and other low-cost expansion of iron ore production, coupled with China's demand for further signs of contraction, iron ore prices fell to less than $ 50. They believe themselves capable of controlling costs, when prices remain low yield can increase market share and force inefficient mining enterprises bankruptcy.
Goncalves began in 2014 in charge of Cliffs, it will end its commitment in excess supply in the market vulnerable to the impact of the situation. But with the iron ore and steel prices fell, Cliffs shares in the last 12 months also fell 73%. Last year, Cliffs output of about 34 million tons of iron ore, Rio Tinto to 295.4 million tons.
Rio Tinto, BHP Billiton insisted on cuts
Metal Bulletin data show that 62 percent grade iron ore Qingdao Port CIF yesterday fell 0.8 percent to $ 49.11 a tonne, the highest since July 9 minimum. Iron ore prices have fallen this year, a total of 31%.
Wall Street knowledge previously mentioned, BHP Billiton marketing president of worldwide marketing Bai Weicheng (Arnoud Balhuizen) said last month, although some competitors suffered commodity prices low impact, but BHP Billiton will not be cut because of its related business for the company cash flow. Bai Weicheng said:
We distinguish with some competitors is that we have a large, front-line and high-margin business. Obviously, we will not close but also bring lucrative cash business.
In his view, the competition is cut normal economic considerations, but to push up the price cut is not necessarily good. "If the business at a loss, to boost the price and there is no benefit, this service should not exist in this market."
Rio CEOSamWalsh has said that if Rio Tinto cuts, corresponding supply gap will also be other companies make up.
In August, Rio Tinto said its first-half ago despite iron ore EBITDA profit fell 49 percent to $ 4.09 billion, but the company's average profit margin is still as high as 54%. Rio Tinto's iron ore business leader AndrewHarding September 3, said Rio's iron ore business is "one of the world's most attractive business."
In addition, BHP Billiton Iron Ore AlanChirgwin vice president of marketing, said iron ore prices will gradually decline, until you find a new balance point below $ 50. According to the cost structure of mining enterprises as well as the ability to reduce costs, and this point will be Australia or Brazil's main mining companies the highest breakeven point.
Goncalves said BHP Billiton's iron ore prices means that the next few years will continue to decline until it reaches the new normal. "If they do not change their behavior, think about the price of iron ore rose significantly.
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