World No. 2 iron ore producer Rio Tinto cited a strategy by bigger rival Vale to divert European shipments to China for a dramatic softening in market prices. Because of the iron ore prices, it affects the jaw crusher markets. Rio's iron ore division head and Australian chief executive Sam Walsh said a move by Vale to ship more to China had not caused Rio to curb its own iron ore production runs, which are running at full capacity.
'The softening in iron ore prices relates to Vale shipping material that was destined for Europe into China,' Walsh told a business forum in Perth on Tuesday. Spot iron ore prices have shed 19 percent so far this month in a sell-off largely fueled by slower construction steel demand in China. China is the world's biggest customer of imported iron ore, accounting for around 400 million tonnes annually. In Europe, a more important market for Vale than Rio, steel markets have fallen under a cloud of doubt given its debt crisis.
Growth of Europe's steel production will slow in 2012 along with activity in the steel-using sectors, Eurofer, the European steel producers association has forecast.
Spot iron ore prices on Tuesday fell nearly 4 percent. It was the biggest single-day drop since August 2009 as thin demand from China forced some traders to sell at a loss. 'Traders who can't hold positions because they don't have sufficient funding are selling at a loss of $40-$45 a tonne,' said a Singapore-based iron ore trader. Despite price falls, all three mega-producers including Rio are ramping up production. Many mining machinery prices such as ball mill, energy saving cone ball mill, impact crusher have changed greatly. 'My business is shipping flat out,' Walsh said. 'We are producing at record rates.' Walsh downplayed the lasting effect of Vale's strategy.
'There's a limit to what they can physically ship,' Walsh later told Reuters on the side of the forum. 'We're not overly concerned about that.' He said Rio remains confident in the long-term drivers of economic growth and iron ore demand in China. In the short term, the market was worried about the European crisis, but it was not having a direct impact on Rio's operations, he said.
'The issue is contagion. It's perception, it's fears,' he said. 'When you look at the fundamentals of China, India, South Asia, North Asia, we find it's very robust.' Vale, the largest of the three top producers, reluctantly discarded the once-a-year-price system in 2010 only after BHP Billiton and Rio bowed out, cognisant it would upset customers. In the end it had no choice but to follow suit.
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