In the short-term the price of iron price may stay around $US130 a tonne, WPG Resources chief executive Martin Jacobsen says.
Jacobsen says India’s restrictions on iron ore exports and continued demand from Chinese steelmakers for foreign iron ore – as Chinese domestic production is uneconomic at current prices – will keep the price of iron ore steady at around current levels.
The WPG chief, who was formerly a vice president of a gold miner with Chinese operations, says he doesn’t expect Chinese growth to drop below 7.5 per cent per annum for the next 15 years. But steel production, which formerly outpaced economic growth, will be in line with the expanding economy for the next decade, he says.
In the medium term, over the next 15 years, the Jacobsen expects 62 per cent grade iron ore price to be $US110 a tonne ore and “maybe drop off lower than that in the longer term.”
WPG, which decided not to exercise its option to acquire a 25 per cent joint venture interest in the Giffen Well magnetite iron ore project in South Australia, is a “little bit apprehensive about the supply of iron ore,” Jacobsen says.
There is increasing production in the Pilbara region and in West Africa, he adds. Large iron ore miners are “not flooding the market,” according to Jacobsen, but smaller producers are. He estimates an additional 100 million tonnes of iron ore will be coming out of South Australia in five years’ time as new production from current “wannabe producers” comes into the market.