Push­ing the com­pe­ti­tion out of the mar­ket

Finweek English Edition - - SIMON SAYS -

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.

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