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UPDATE: BHP Billiton: Coking Coal Seen More Scarce Than Iron Ore
Bhp Billiton (NYSE:BHP)
Intraday Stock Chart
Today : Thursday 13 October 2011


Anglo Australian mining titan BHP Billiton Ltd. (BHP) expects coking coal to be more scarce than iron ore over the next decade given less supply growth in the former when compared to the latter steelmaking raw ingredient, the chief executive of BHP's ferrous and coal division said Thursday.
"We are more bearish about iron ore than coking coal," said Marcus Randolph during the annual World Steel Association conference. "Between now and 2020 there is going to be a lot more iron ore supply coming into the market than coking coal, and our expectation is that, of the two, the scarcer over that period of time will be coking coal."
He noted that China hit an inflection point in terms of its own coking coal resources in 2008 and became a net importer starting in 2009 due to limited domestic supply and burgeoning steel demand in the Asian country.
The Chinese supply and demand scenario is forecast to result in a 5% compounded annual growth rate for global sea-borne coking coal supply between 2010 and 2020 while global coking coal supply is forecast to rise by only 3% during the same period.
The Bowen basin in northeast Australia, which currently accounts for about two-thirds of the world's sea-borne coking coal, is forecast to grow at a 6% CAGR between 2010 and 2020 while China will grow at 2% and Canada will grow at 12% during the same period, according to Randolph's presentation. The Bowen basin's growth has been hampered by transport infrastructure bottlenecks related to its ports, Randolph said.
Meanwhile global sea borne iron ore is forecast to grow at a 5% CAGR between 2010 and 2020, a slightly lower rate than the 8% CAGR growth during the previous decade, but still above global iron ore supply CAGR of 4% over the next decade.
The major growth areas in the next decade are Brazil with a 12% CAGR, Australia at 15%, Guinea at 49% and India at a 3% CAGR. The region around Chile and Peru is forecast to grow at a 34% CAGR between 2010 and 2020, Randolph's presentation showed.
Randolph said iron ore prices remain high because "we can't produce enough to supply you." But as more supply comes onstream, prices will fall. He says prices will fall at a slow rate because of the large chunk of high cost production that now exists in the iron ore market.
Randolph estimates that 340 million tons of iron ore supply has been brought into operation over the last decade that isn't considered low cost.
Randolph also said that the company hasn't experienced any cancellations or order delays from Chinese customers.
-By Alex MacDonald, Dow Jones Newswires; [phone], [e-mail]