From Morgan Stanley:
What’s required for a rebalance? Assuming no operations close and producers deliver what has been guided, we estimate the global seaborne iron ore market (including domestic Chinese production) would be in a 71Mt surplus in 2014. By next year, the surplus will rise another 86Mt. These figures are the magnitude required of material to exit the market to achieve price stability.
Industry consultant, Wood Mackenzie, estimates 52Mt of Chinese domestic iron ore capacity has so far been permanently removed as a result of low prices. So far, the group claims, all closures have been from small scale, private mines and none from state-owned operations. We estimate another 100Mt is currently operating at a loss and thus think a healthy portion of that figure will exit the market next year.
Outside of China, we have counted 25Mt of supply cuts, the majority of which are price related. We consider another 120Mt at risk to close for similar reasons and expect the trend to intensify in 2015 amid low prices.
Hmmm, not very convincing. What’s the Wood Mackenzie evidence given the frustrating opacity of the Chinese market? As well, the MS list of seaborne closures includes 5mtfor London Mining, which is still open and has been rescued overnight (though admittedly only by African Minerals which is itself in trouble).
Mass closures are absolutely coming. I just reckon lower prices will be needed for the process to accelerate past cost cutting measures.
