Anglo’s Cutifani rebukes his rivals

Iron ore glut is deepening

ANGLOAmerican chief executive Mark Cutifani rebuked rival mining companies for deepening a global iron ore glut that had driven the price down by 45 percent in a year.

“We have an over-supplied market, that’s clear as a bell,” Cutifani said on Friday after reporting a 30 percent decline in underlying earnings. “That’s clearly had an effect on price. We are responding. In the end, you’ll have to ask others how they intend to respond.”

The world’s biggest producers of iron ore, one of the key profit drivers for companies including BHP Billiton, Rio Tinto and Vale, have been criticised for continuing to expand output amid weakening prices.

The commodity price rout to a 13-year low would worsen in the second half as demand waned and supplies for key raw materials like iron ore expanded, Cutifani said.

Production cuts at Anglo’s platinum, diamond and coal businesses show the company was responding to slowing demand and trying to combat oversupply across its markets, he said.

Making changes

“We’re very clear in our position, we respond to the market and are making the changes, unlike some who talk about it and don’t do that much,” Cutifani said on Friday.

“We’ve cut production and closed mines. There are a lot of people out there who talk about market discipline. I’ve heard almost everybody talk about it in the industry, and not everybody is being consistent with their actions.”

Anglo produces iron ore in South Africa and is increasing production from its giant $8.8 billion (R110.95bn) MinasRio mine in Brazil where it plans to reach full capacity by mid-2016. The company took a $2.9bn impairment charge on the mine as it reported earnings on Friday, citing lower future price forecasts.

Anglo’s Kumba Iron Ore, Africa’s largest producer, scrapped its dividend last week for the first time since it started trading in 2006 as profit slumped 61 percent.

After more than a decade of surging Chinese demand that catapulted prices to record levels, iron ore has collapsed, declining 47 percent last year as a global glut deepened.

Eroded profits

The price slide has eroded profits for the three biggest exporters, which supply almost half of the world’s demand, sparking criticism in Australia from such rivals as Fortescue Metals Group.

It has also put smaller highcost rivals like London Mining and African Minerals out of business.

Cutifani estimated the glut in iron ore at 100 million tons to 200 million tons. Morgan Stanley forecast a 58.1 million-ton surplus this year.