BHP Billiton Anticipates Further Decline in Iron Ore Prices in Coming Months; Ships 1 Billionth Ton of Commodity to Japan

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By Vittorio Hernandez | July 7, 2014 8:22 AM EST

Mining giant BHP Billiton (ASX: BHP) said the 31 per cent drop in the price of iron ore in the international market may not be the last. It anticipated further declines in the price of the key steel-making ingredient in the coming months, said BHP Billiton President of Marketing Mike Henry.


A worker levels the iron ore in a freight train at a railway station at Chitradurga in the southern Indian state of Karnataka in this November 9, 2012 file photo. One of Indian prime ministerial hopeful Narendra Modi's main election planks is to crank up manufacturing to create millions of jobs by focusing on exporting steel, not iron ore. REUTERS/Danish Siddiqui/Files

In the past 12 months, the price of the commodity has gone up and down, but in the final quarter of the financial year, it fell to a 21-month low of $89, although it has partially recovered in the past few days and closed on Thursday at $94.70.

"What we're seeing today in the marketplace is within the range of expectations that we've had," Henry said.

He added, "We've been saying for a long period of time now that growth rates in China will begin to slow, that you would see steel intensity slowing at an even greater rate than GDP declines, and at the same time you'd see a lot more low cost supply coming to market that would bring prices down."

Analysts said that BHP and Rio Tinto (ASX: RIO) still make healthy profits at the $90 level, with Rio's breakeven at $43 and BHP at $45 a tonne. However, it would be more difficult for smaller miner with higher breakeven prices at $72 for Fortescue Metal Group (ASX: FMG) and $82 for Atlas Iron, both single-commodity iron ore miners, warned rating agency Standard & Poor's.

Meanwhile, BHP just made its one billionth iron ore shipment to Japan. It first exported the commodity to Japan in 1966. BHP celebrated the milestone with its employees, customers and joint venture participants at Port Hedland in Western Australia.

"Today the high-quality iron ore we export from the Pilbara is an essential ingredient in Japan's high-tech steel industry which leads the world in technology and efficiency," BHP President of Iron Ore Jimmy Wilson said.

He acknowledged that BHP owes so much to Japan for its role in growing the firm's iron ore industry in Pilbara and stressed that its joint venture participants, ITOCHU and Mistui, contributed capital. As trade partners, they served as key links into business markets.

Wilson said that BHP has invested $24 billion over the past 10 years in Western Australia's mines, rail and port infrastructures and continue to shift to new technology to ensure its operations would remain world class.

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A worker levels the iron ore in a freight train at a railway station at Chitradurga in the southern Indian state of Karnataka in this November 9, 2012 file photo. One of Indian prime ministerial hopeful Narendra Modi's main election planks is to crank up manufacturing to create millions of jobs by focusing on exporting steel, not iron ore. REUTERS/Danish Siddiqui/Files
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