Iron Ore Seen at $45 by UBS as Exports Expand, Costs Tumble

By Phoebe Sedgman

(Bloomberg) — Iron ore shipments from Australia are set to select up within the second half on mine expansions from the most important suppliers, in keeping with UBS Group AG, which forecast that costs could common $45 a metric ton between July and December.

While some higher-cost provide is being lower, together with from Atlas Iron Ltd., development in output will proceed, the financial institution mentioned in a report acquired on Wednesday. Rio Tinto Group’s subsequent 60 million tons a yr could come on-line from the second half, and BHP Billiton Ltd. remains to be shifting towards capability of 270 million tons a yr from an estimated 260 million tons, in keeping with the financial institution. The new Roy Hill mine may begin shipments, it mentioned.

Iron ore surged towards $60 a ton this month after BHP mentioned that it was deferring some port works in Australia that will sluggish its development after 2016. Brazil’s Vale SA adopted with a sign that as a lot as 30 million tons of its higher-cost provide could also be lower even because the Rio de Janeiro-based firm pressed on with an growth of cheaper provide. Miners have been stepping up efforts to scale back their prices, in keeping with UBS.

“We anticipate growth in export volumes through 2015, particularly in the second half, as new capacity from Rio Tinto, Hancock Roy Hill and ongoing asset optimization from BHP Billiton allow increased shipments,” UBS mentioned within the report. “Recent cuts help, but the market is expected to remain in an albeit-smaller surplus over the medium term.”

Ore with 62 p.c content material at Qingdao rose 2 p.c to $58.70 a dry ton on Tuesday, in keeping with information from Metal Bulletin Ltd. In April, costs climbed 9.4 p.c, the largest achieve since July 2013. They are 69 p.c beneath a 2011 document.

Export Jump

Exports from Australia, the world’s largest shipper, climbed about 5 p.c in March from February to 61.4 million tons, UBS mentioned, citing figures from the Australian Bureau of Statistics. Overseas gross sales surged to 716.7 million tons final yr from 582.8 million in 2013, it mentioned. The financial institution forecasts that the nation’s exports could complete 809 million tons in 2015.

“Supply cuts are not sufficient to drive higher prices when operators are cutting costs, and as demand remains weak,” UBS mentioned. Risks to consumption remained in China, the place the property sector is underneath strain, it mentioned. The financial institution’s report lined an evaluation of Australia’s bulk-commodity shipments in March and, individually, checked out iron ore provide and prices.

–With help from Jasmine Ng in Singapore.