BHP Billiton, the world's largest miner, was downbeat on Wednesday about iron ore prices as low-cost producers continue to swamp the market and as the intensity of China's demand for the steel making raw material ebbs.
However, there were some positive signs on the economic outlook for top commodity consumer China, BHP officials told a briefing during the LME Week industry gathering.
"By the end of this year, there will be additional iron ore coming from Australia, from Brazil," Arnoud Balhuizen, president of the group's marketing unit, told a media briefing.
"Our expectation is that the iron ore market cost curve will continue to flatten and continue to come under pressure."
In China, while some state-owned iron ore mines continue to operate even though they are losing money, privately-owned mines have largely been closing down when they go into the red, he added.
"You'd be surprised how capitalism is making its way into China. If you own a mine in China, it's a universal thing that you don't like to lose money."
A substantial driver of the decline in commodity prices this year has been the fear of a hard landing in China's economy, but BHP sees glimmers of hope despite weak industrial production data, said Stacie Wu, vice president of market analysis in the marketing unit.
"In terms of the industrial side, which drives a lot of our commodities in the near term, we look at other measures as well, for example electricity generation, and some of those lead indicators actually tell us there is activity happening," she said.
"If you look at property sales and property prices, those have been improving as well."
Balhuizen said there has been no issues with finding buyers recently. In the most recent financial year, BHP's marketing unit handled $45 billion of sales.
"All our commodities we have continued to see over the last couple of months, commodities going, inventory levels not being built up throughout the supply chain," he said.
"So while prices are lower, it hasn't stopped business, and in some businesses we have seen increased flows."
Balhuizen also said he did not share the concerns of some others that a surge of speculative activity was distorting commodity prices.
In August, the chief executive of hard-hit commodity group Glencore, Ivan Glasenberg, blamed short sellers and hedge funds for a rout in his shares, saying they did not understand his business and were painting "doomsday scenarios" for commodities.
Speculative activity has been a big factor in financial markets for over 25 years and can cause short-term volatility, but was not a cause for concern, Balhuizen said.
"Some people who are complaining about it now have probably been big players in it as well. So let's be realistic about it," he said.
http://www.reuters.com/article/2015/10/14/metals-lmeweek-bhpbilliton-idUSL8N12E2LD20151014
