Pushing the competition out of the market
While Sasol is reconsidering its gasto-liquids (GTL) plant in Louisiana, we’ve also seen Lonmin reduce its capex spending for 2015 to $185m from $250m last year. According to reports, Glencore is also considering closing some of its local coal operations. This is totally expected as miners look to cut costs and focus on lower-cost mines that remain profitable when commodity prices drop. The other side of the coin is iron ore, with both BHP Billiton* and Kumba pushing production as hard as possible. They’re both lowcost producers of iron ore, so they still make profits at lower prices and the idea behind increasing production is simple – push prices even lower and thereby driving the higher-cost producers out of the market, hence reducing supply.