ADVERTISEMENT

Investing

Fortescue Says Iron Ore Watchers Misjudging Looming Supply Woes

Iron ore. (Andrey Rudakov/Photographer: Andrey Rudakov/Blo)

(Bloomberg) -- Fortescue Ltd. said the iron ore market may have misjudged fundamentals for the key steelmaking ingredient due to the hurdles involved in ramping up overall supplies, as output from existing mines wanes.

“There are some supply challenges,” Fortescue’s metals chief Dino Otranto said in an interview at the International Mining and Resources Conference in Sydney on Tuesday. “People are under-appreciating that mines do run out and these huge iron ore deposits that we saw 50, 60 years ago just don’t exist anymore.”

A slowdown in China’s economy due to lower steel demand in its property sector may weigh on iron ore prices in the coming years, BHP Group said in August. The biggest miner reiterated its belief that Chinese demand for steel has already plateaued at about 1 billion tons a year.

Most iron ore mines currently being brought into production have smaller mine-lives than those discovered decades ago. Typically, according to Fortescue’s Otranto, these deposits may only last between five and 20 years. Adding to supply issues are cumbersome regulatory approvals in Australia’s iron ore-rich Pilbara region, he said. 

“Some of the investment community has misjudged the supply challenges, so one could argue that the new supply may only just counterbalance supply that’s coming out,” Otranto said.

Australia’s Fortescue, one of the world’s biggest iron ore miners, is progressing studies into its Belinga project in Gabon, Otranto said. The site was probably the last undeveloped high-grade iron ore deposit of its size and scale “left in the world,” he added.

©2024 Bloomberg L.P.