BHP held an investors round table yesterday and it produced a few interesting iron ore snippets. From Citi:
WA Iron Ore is on track to deliver 220mtpa by mid-14, with an unapproved US$1b expansion of Jimblebar likely to take that to 240mtpa. To reach 300mtpa an additional mining hub, in-load capacity and berths in Port Hedland will be required, which given forecasts for building iron ore surpluses and calls from shareholders for capital discipline and increased returns could increasingly come under pressure in our view. A decision on whether to push ahead on Jansen will be required in the next few months as the precommitment capex has largely been spent. Although we appreciate the long-term attractiveness of the industry, low capacity utilization and increased supply already coming are likely to pressure prices and we think the project should be delayed.
And from UBS:
BHP remains focused on doing the right thing by shareholders and customers and would not leave capacity idle to support the iron ore price.
As I’ve said before, I see little chance of the majors holding back iron supply to support the price. They’ve invested already and are trapped. To withhold supply would simply mean no growth.
Nope, it’ll be a race down to the cheapest marginal cost of production now…
