Rio Tinto turns up the heat on rivals with even cheaper iron ore
News that the lowest-cost producer is mining ore at US$17 per tonne signals a more protracted price slump and draws political criticism
Rio Tinto Group chief executive Sam Walsh is fast becoming the worst nightmare of rival iron-ore producers starved of cash.
Iron ore prices have slumped by more than half in a year on a deepening global supply glut. That has pushed some into bankruptcy and left others on life support.
News that the lowest-cost producer is mining a tonne of ore even more cheaply signals a more protracted price slump.
After achieving an industry-leading US$19.50 a tonne last year, currency movements and a drop in fuel costs mean Rio Tinto is now producing at US$17, Walsh told investors in London. The company is still seeking ways to ship it to Asian buyers more cheaply, he said.
"I know there's a lot of controversy," Walsh said. "I know that there's a lot of late entries into the market who have taken advantage of higher prices and they are now feeling the impact of that as prices have come down.
"This is rational, normal economics," he said. "This is what physically happens across a range of commodities not just iron ore. It's a process that we and others have got to work through."