The head of Rio Tinto’s (ASE:RIO) iron ore business in Western Australia has expressed optimism about the sector’s prospects despite a plunge in spot prices this year and concerns over China’s slowing growth.
Greg Lilleyman, in an address delivered to the Committee for Economic Development of Australia in Perth on Friday, said Rio’s optimism on iron ore has increased due to a recent bounce back in spot prices and positive signs from Chinese suppliers.
According to Lilleyman Chinese iron ore miners have indicated that they are reducing output or exiting production due to their high-cost of operation, which should limit the downside for spot prices.
Iron ore players in Australia have been severely hampered by spot price declines this year, with levels plunging from USD$170 a tonne to less than USD$90.
Prices leapt back to USD$118 per tonne last week on the abrupt resumption of trading activity by Chinese players following the week-long October vacation.
Lilleyman also said he believed demand for iron ore from China would continue to grow, although at a slower rate than during the mining boom’s peak phase.