UPDATE 2-Australia cuts iron ore output f’cast, trims copper
Australia slashed its forecast for iron ore output in the year to next July by more than 15 percent as the global steel market withers, suggesting deeper cuts are in store from miners, but made modest reductions in metallurgical coal and copper production. The collapse in global commodity prices has forced deepening rounds of production cuts by miners and producers around the world, although the tumbling Australian dollar has helped soften the blow for top corporates like Rio Tinto Ltd. and eased the decline in revenues from its top export industries. ’These iron ore figures suggest there are movements underway to cut Australian production even more than we’ve seen and keep the stuff in the ground for a better day,’ Patterson Securities analyst Andrew Harrington said. ’Likewise, in coking coal, we’ve got to see more of a reduction than just what ABARE’s already factored in to match this drastic fall in steel.’ Taking into account closures already occurring across the country, the Australian Bureau of Agricultural and Resource Economics downgraded its forecast for refined copper output for the year ending June 30, 2009, by 4 percent to 508,000 tonnes and its view on mined copper by 10 percent to 924,000 tonnes In its latest quarterly outlook, ABARE also cut its iron ore production forecast to 327 million tonnes versus 387.2 million tonnes forecast in September, which is still up 0.7 percent from last year’s actual production figure. It said output of metallurgical coal output would be 146.6 million tonnes versus a previous forecast of 154.4 million tonnes. ’The outlook for steel and steel-making raw materials has deteriorated in the past three months,’ Rohan Kendall, an ABARE analyst, said in the report. Rio Tinto Ltd has already reduced its forecast production estimates for 2008 by 10 percent to around 175 million tonnes and said output would grow by only about 3 percent next year. Brazilian rival Vale has also slashed output while BHP Billiton Ltd/Plc has resisted making any sweeping reductions so far. Demand for iron ore and metallurgical coal, dependent solely on purchases from steel mills, has been particularly hard hit by the global financial crisis as steel makers slash production, reducing the need for raw materials. China’s once-bustling steel mills have cut production by a fifth since the global financial crisis first infiltrated its economy a few months ago. This followed earlier downsizing measures by steelmakers elsewhere, with the world’s largest, ArcelorMittal , reducing output 35 percent and warning of 9,000 job losses. ’No mining company wants to over produce in this market,’ said DJ Carmichael & Co analyst James Wilson. ’The idea is to match production with demand as best you can.’Aluminium production was forecast to remain stable in 2008/09 at 1.96 million tonnes. The government also revised down its refined nickel output forecast 6.7 percent to 111,000 tonnes. Most stainless steels contain nickel. Overall, Australia’s commodity export earnings are now forecast to bring in A$192 billion ($127 billion) in the business year to June 30, 2009, down from ABARE’s September forecast of A$214 billion but still 30 percent up on last year, according to ABARE’s executive director, Phillip Glyde. ’While world prices for many commodities have declined markedly over the past few months, a significant depreciation of the Australian dollar, if sustained, is expected to provide some support for commodity export earnings,’ Glyde said.