Has the cost out story in iron ore passed its peak?
The iron ore producers globally have reported 2016 March quarter results and with that have updated their cash cost positions. In most cases we have seen further cost reductions achieved as oil prices averaged lower in the quarter, and in some instances producers (Kumba) have chosen to shut in high cost mines. The Australian Big 3 (RIO, BHP & FMG) are now firmly ensconced under US$20/wmt fob excluding royalties, with FMG and RIO under US$15/wmt fob, while BHP’s cost decline appears to have stalled at US$15/wmt fob. Meanwhile Vale’s costs according to its Q4 15 results were US$11.9/t excluding royalties, down from US$12.7/t in Q3 15.
The full text of this article is available to MacroBusiness subscribers
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
