Iron ore majors ramp up supply even as China faces challenges
Iron ore is one of the year’s worst performing major commodities, slumping by almost a quarter as China’s property crisis drags on.
Stricter environmental rules on new mining projects, combined with soaring labour costs, are making Vale SA, the world’s leading iron ore producer, less competitive against Australian rivals Rio Tinto and BHP Billiton.
Bloomberg reports Brazil’s share of the seaborne iron-ore market could drop from 31% to 27% by 2016, while Australia’s may grow from 41% to 50%:
“We are becoming less competitive,” Jose Fernando Coura, president of the Brazilian Mining Institute, said by telephone from Brasilia. Getting approval for a new project is “a Cavalry because you need to go through 350,000 institutions,” he said.
The output drop is partly due to Vale’s delaying the $8 billion Carajas Serra Sul expansion plus at least three other projects “amid environmental permit issues, higher costs and labor shortages,” the news outlet reported.
In Australia, on the other hand, “The investing environment … is a little bit friendlier than in Brazil from a political, environmental and permitting standpoint,” Bloomberg quotes New Jersey-based analyst Andrew Cosgrove saying. “Brazil may not be seen as the source of new supply in the future that a lot of people are expecting.”
