RPT-COLUMN-BHP, Rio were right on iron ore demand, wrong on supply: Russell
(Repeats with no changes to text) - Clyde Russell is a Reuters columnist. The views expressed are his own. -
By Clyde Russell
LAUNCESTON, Australia, Nov 24 (Reuters) - What was lacking at BHP Billiton's annual meeting was an admission that what has effectively happened with iron ore is that the company's shareholders are subsidising the profits of Chinese steel mills.
Instead, what Chairman Jac Nasser told the media after the AGM on Nov. 20 was iron ore prices were "not inconsistent with the expectations we had built into our long-term investment".
Both Nasser and Chief Executive Andrew Mackenzie were keen to emphasize the productivity successes at the iron ore business, saying it remains one of BHP's main profit drivers.
That may well be true, but the message from the executives at last week's AGM doesn't quite tally with what BHP was saying in 2011, when it was approving the massive expansion of its iron ore operations in Western Australia.
It was around this time that BHP, its Anglo-Australian rival Rio Tinto, newcomer Fortescue Metals Group and top iron ore miner Brazil's Vale were all making decisions to radically boost output of the steel-making ingredient.
This unprecedented capacity expansion was based on the two-pronged view that China, which buys about two-thirds of seaborne iron ore, would continue its rapid growth for decades to come, and that low-cost producers would be able to force higher-cost miners from the market. Continuación...