Anglo American Chief Executive Officer Mark Cutifani rebuked rival miners for deepening a global iron ore glut that’s driven the price down by 45% in a year.
“We have an over-supplied market, that’s clear as a bell,” Cutifani said Friday in an interview with Bloomberg Television after reporting a 30% 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 Group and Vale SA, have been criticized for continuing to expand output amid weakening prices. The commodity price rout to a 13-year low will worsen in the second half as demand wanes and supplies for key raw materials like iron ore expands, Cutifani said.
Production cuts at Anglo’s platinum, diamond and coal businesses show the company is responding to slowing demand and trying to combat oversupply across its markets, he said.
“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 a call with reporters Friday. “We’ve cut production and closed mines. There are 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 Minas-Rio mine in Brazil where it plans to reach full capacity by mid-2016. The company took a $2.9 billion impairment charge on the mine as it reported earnings Friday, citing lower future price forecasts.
Anglo’s Kumba Iron Ore, Africa’s largest producer, scrapped its dividend this week for the first time since it started trading in 2006 as profit slumped 61%.
After more than a decade of surging Chinese demand that catapulted prices to record levels, iron ore has collapsed, declining 47% last year as a global glut deepened.
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’s also put smaller high-cost rivals like London Mining Plc and African Minerals out of business.
Cutifani estimated the glut in iron ore at 100 million metric tons to 200 million tons. Morgan Stanley forecast a 58.1 million-ton surplus this year.
©2015 Bloomberg News