Some reality from BHP:
J.P. Morgan analyst Lyndon Fagan says it’s hard not to feel bearish on the iron-ore price outlook after touring the operations of BHP Billiton Ltd. (BHP.AU) in Australia’s west. BHP estimated around 200 million tons of China’s iron-ore capacity will be “sticky,” he says, meaning it will keep running even if there’s little or no profit to be made. While that implies there could be another 80 million tons worth shutdown in future–BHP estimates total Chinese output of 270-280 million tons this year–robust Chinese output is going to exacerbate a supply glut…
Even if we allow for some steel output growth, that means the majority of the adjustment will be in the seaborne market.
