From Jasmine Ng at bloomberg.com:
Big Four’s highest-cost mines pressured: Capital Economics
Miners’ shares retreat, with Vale sliding to 12-year low
Iron ore’s tumble into the $30s threatens the world’s largest miners as prices approach break-even costs, according to Capital Economics Ltd. Shares of Vale SA, the biggest producer, sank to the lowest in 12 years.
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 in Brazil and Rio Tinto Group and BHP Billiton Ltd. 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 46 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.”
To continue reading: Iron Ore in the $30s Seen Near Tipping Point for Largest Miners
