Vale SA does not believe iron ore prices will be
significantly affected by new output capacity over the next few
years as ore depletion and growth in Chinese steel production
will continue to balance the market.
Every year the global
steel market needs "at least 100 million tonnes" of added iron
ore output, José Carlos Martins, executive director for
iron ore and strategy at Vale, said during a conference call
for analysts. Some 50 million to 60 million tonnes of new iron
ore production is necessary each year just to replace output
that is lost globally by ore depletion.
"Ore depletion depends
on (iron ore) prices: when prices are high, depletion
decreases, and when price goes down, depletion increases,"
Depletion falls when
iron ore prices rise because idled mines, which produced
material with a lower iron content, are put back into
operation, thus increasing total iron ore production. As soon
as prices start to decrease, such costlier mines have to shut
Martins estimated that
3 to 5 percent of the worlds iron ore production
decreases are due to ore depletion.
Meanwhile, growth in
steel production, especially in China, requires 60 million to
70 million tonnes of added iron ore output per year.
"In the past few years
there has been a level of $130 per tonne as an annual average,"
Martins said. "Its possible that there will be some
reduction due to the entrance of new projects, (but) I
dont believe prices will fall in a sustainable way over
the next few years below the levels of $100 to $110 per
A version of this article was first pubished by AMM sister
publication Steel First.