Iron ore war: Rio Tinto ‘not standing still’ over BHP’s production boost
Global miner Rio Tinto (LON:RIO) blasted Thursday rival BHP Billiton’s (ASX:BHP) announced plans to bolster iron ore production and become the world’s lowest cost miner of the steel making ingredient.
“You can rest assured, we are not standing still,” Rio Tinto iron ore division chief Andrew Harding told reporters on a conference call, Reuters reports.
He also defended Rio’s own plans to ramp up ore production arguing that those who claim the big three —BHP, Rio and Vale— are killing a decade-long commodities’ boom by oversupplying the market were “fundamentally wrong”.
“Curtailing production would simply create a void that was filled by other producers and new starters,” he said. “Our analysis indicates there are 32 competitive projects that could be incentivised if we were to withhold volume.”
Rio Tinto, Australia’s biggest iron ore exporter, intends to increase production by almost 25% to 360 million tonnes.
Harding told the Sydney Morning Herald that the firm’s returns were “unrivalled” in Australia’s iron ore industry and that demand from China would remain strong.
“We are confident about the outlook for our iron ore business, under any pricing scenario.”
BHP expects to boost its mining capacity by 65 million tonnes to 290 million tonnes a year by June 2017. It also plans to cut production costs to less than $20 a tonne from $27.50 for the 2014 financial year in a bid to become the lowest cost miner. That compares with Rio Tinto’s cost of $20.40 a tonne in the first half of 2014.
Iron ore prices have plummeted by 40% this year below $80 per tonne amid a jump in production and a slowdown in demand growth in China.