Iron ore “price floor” mysteriously lowered

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From the AFR today:

Vale, the world’s largest iron ore producer, will maintain cost and capital-spending austerity this year even as the outlook for prices is improving, its chief executive officer said.

…His remarks come as Vale reported a net loss of $US6.45 billion in the quarter, its largest since Brazil’s government sold control to private investors in 1997 and more than twice the shortfall of the year-earlier period. The loss came as a result of a one-time income tax settlement and the writeoff of an abandoned potash project in Argentina.

…Vale is working with a “nearly 100 per cent chance” of meeting output targets for iron ore during the next two years, Jose Carlos Martins, the company’s head of ferrous metals, said on a conference call with investors on Thursday. He added that ore quality will again become a defining element in pricing, helping boost the value of Vale’s high-grade iron ore in China, its main market.

Executives also said that market conditions will make it difficult for iron ore prices to fall below $US110 a tonne in the spot market.

Price outlook improving? Price floor lowered to $110? Elvis seen alive in the Pilbara. Whatever they say must be true!

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.