In light of iron ore gains this week after a 7% slide in the week prior, Rio Tinto CEO Sam Walsh suggests that the decline in the iron ire price may be nearing an end.
Earlier, Goldman Sachs’ projected that there would be a continued fall in the price of iron ore to $80 a tonne, but Walsh said he was confident the retreat wouldn’t extend that far.
“I don’t think we’re going to go down to $80 or else a lot of my friendly competitors are going to disappear,” he told Bloomberg in London on Wednesday.
“When we saw prices at $80 a year and a half ago, we saw a number of people come out of the market; domestic supply in China, Africa and some in Australia.”
Cool in demand
According to data from the The Steel Index on Tuesday, the import price of 62% iron ore fines at China’s Tianjin port was pegged at $92.50 per tonne, up $0.40 on the day.
Iron ore is down 31% year to date on expectations of a glut on markets just as demand from China cools.
Walsh says that the make-up of supply and demand should see a recovery in the price of the commodity. “I think that $80 is actually too low,” he said. “I suspect a level of somewhere north of $100 is more realistic.”
Walsh noted however that should the value of iron ore continue to weaken, Rio was in the best position to cope with it.
Meanwhile, stockpiles of imported iron ore at Chinese ports are at record highs above 110 million tonnes according to industry consultancy Steelhome, up more than 50% from this time last year.