Iron ore, copper oversupply here to stay, so get used to it — BHP’s Mackenzie
Outspoken Andrew Mackenzie, chief executive officer of the world’s largest mining company BHP Billiton (ASX: BHP), said Wednesday that the global oversupply of commodities that is putting pressure on prices and miners is likely to carry on for longer than expected.
“In many markets, recently installed low-cost supply can now be stretched to meet growing demand,” Mackenzie said in a speech in Canberra. “Incremental supply, induced during periods of higher prices, will take longer to absorb and this means over-supply may persist for some time.
The company he leads and rival Rio Tinto (LON:RIO), the world’s No.2 and No.3 iron ore producers respectively, have been flooding the market as of late, which has left smaller, high-cost producers struggling to survive. This strategy has been highly criticized in Australia, where some actors such as Fortescue Metals Group (ASX:FMG) even proposed a government inquiry into the sector, aimed to determine whether the firms had or not behaved in a “predatory” way, severely affecting the local economy.
BHP’s iron ore division president, Jimmy Wilson, says the company’s share of the seaborne iron market has stayed pretty much the same at roughly 17%, despite its major investments.
“Fortescue Metals has grown its share of seaborne exports to 11 percent since entering the market in 2007 – they have been the world’s most prolific iron ore growth story between 2007 and the end of 2014,” he wrote in a comment piece for The Australian.
Prices for the steel making material, Australia’s top source of foreign income, hit $46.70 a tonne in April, the lowest in a decade. The have picked up since then to around $63 this week.