According to The Australian Financial Review, the world's biggest producer of iron ore says the industry is enjoying a Goldilocks moment with prices generating a tidy profit but not enough to lure much new supply.
"The market is in a sweet spot right now from $US60 to $US70," Vale chief financial officer Luciano Siani Pires told Bloomberg Television. "It is a price which does not incentivise too much swing capacity to come back and it's a very profitable range for major mining companies."
Prices of the steel-making ingredient have see-sawed this year, rallying to $US95 in February before tumbling to $US53 in mid-June as glut fears resurfaced. Now they're back above $US70 after an up-tick in demand from Chinese steel mills. But prices probably will average $US50 in the final three months as falling steel prices hurt mills' margins, according to Barclays. India's JSW Steel said this week that prices may go as low as $US40.
Vale disagrees. It's betting prices will stay in a $US60 to $US70 range for the rest of the year supported by still "very strong" demand and supply "that is a little more tame", Siani Pires said from Bloomberg's Rio de Janeiro office.
While China's demand outlook remains bright, underpinned by infrastructure spending, growth is set to return to "more normalised" levels from the current rate of about 5 per cent to 6 per cent, he said.
Spot ore with 62 per cent content delivered to Qingdao was at $US72.93 a tonne on Thursday, after hitting $US73.70 earlier this week, the highest since April, according to Metal Bulletin Ltd. The raw material rose 13 per cent in July after a 14 per cent gain in June, paring this year's drop.
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