Vale: Iron ore oversupply won’t last

Iron ore prices of $90 to $100 a metric ton are sustainable over the long term, according to the Brazilian miner, Vale, which predicts that some producers that started output when prices were much higher won’t be able to survive the slump.

Demand for ore in China, the biggest buyer, may expand 3 percent this year and next year, Claudio Alves, global director of ferrous marketing and sales at vale, stated. He commented that in the long term, the market won’t be oversupplied all the time.

Iron ore fell into a bear market this year after producers including Vale and Australia’s Rio Tinto Group (RIO)raised low-cost output, spurring a global glut just as economic growth in China slowed. There’s a risk the collapse in prices may deepen as supplies mount, according to Moody’s Investors Service. Vale’s stock fell yesterday to the lowest close since 2008.

“Because of the extraordinarily high price before, many suppliers came into the market, even very rudimentary and manual and family businesses, trying to produce iron ore in every possible way. At $150, everybody wants to ship some,” said Alves. “They will have to go out and market will balance.”

Global seaborne output will exceed demand by 100 million tons this year from 16 million tons in 2013, HSBC Holdings Plc said in an Oct. 22 report that reduced the bank’s price forecasts for the next three years. Chinese production will decline 15 percent to 339 million tons this year from 2013, and drop to 236 million tons in 2015, the bank estimates.

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