From Bloomberg:
The most expensive operations at the four largest suppliers are on the verge of making losses at rates below $40 a metric ton, said John Kovacs, senior commodities economist at Capital Economics in London, who estimates their break-even levels at $28 to $39, taking into account freight and other costs. While these producers will keep output strong, they’ll be constrained by low prices, he said by e-mail on Monday.
Iron ore’s plunge below $40 comes as producers including Vale SA in Brazil and Rio and BHP in Australia press on with expansions to cut costs and defend market share just as demand from the largest consumer China slows. They’re the world’s biggest suppliers along with Fortescue Metals Group Ltd. Prices of the raw material have lost 45 percent this year and have plunged 80 percent from their peak in 2011.
“The big four will find it hard to maintain output at below $40,” Kovacs said in response to questions. “If prices remain weak, output from the highest-cost mines of the big four will be under pressure.”
Wrong. There will be no major miner cuts until the juniors are all bust. It doesn’t matter if the price falls to zero, they will not cut. When the juniors are gone then they will fight each other over market share and will still not cut unless any given mine is under water.
And so the price will keep falling as they cost out all the way down to $20 breakevens. CE’s $50 plus price target is a joke.
