Atlas Iron’s managing director, Ken Brinsden, this month met his Chinese steelmaking customers who typically buy almost all his company’s iron ore.
“Our customers don’t expect the iron ore price to go back to $US80 a tonne in the near term, or if volatility arose, that it would stay there a considerable time,” he told Business Spectator.
“China’s overly reliant on domestic production and that is what drives the iron ore price.”
In the three months to March 31, Atlas sold a record 1.86 million tonnes. About a third was lower grade iron ore that fetched the company $US109 a tonne while the remaining production was higher grade iron ore that was sold for $US126 a tonne.
The company’s cost of production is between $US46 and $US50 a tonne, according to Brinsden. The lower grade iron ore is a byproduct of Atlas’ higher grade iron ore.
“The investment community and media are overly negative about iron ore,” Brinsden says.
“Most Chinese buyers believe the market is undersupplied. There is new supply coming on in the Pilbara, but not as quickly as analysts would have you believe. There is not enough sea borne (iron ore) trade supply for China. There is a disconnect as to what markets are saying in the near future and our practical experience. It’s a very healthy market and we’re making very health cash margins.”