Local commodity iron ‘uncladded’

IRON ore’s value this week slumped to a 22-month low as China, the world’s biggest user, dropped its demand for the locally mined mineral.

The raw material, prevalently extracted by Richards Bay Minerals (RBM) to produce high-purity pig iron used in the automotive industry, declined below 90$ a metric ton for the first time since September 2012.

This has been largely attributed to China having boosted its internal production of the commodity, which dampened international demand and subsequently compressed iron ore’s worth in the world marketplace.

RBM’s holding company Rio Tinto is the second largest global producer of the product after Brazilian diversified metals and mining corporation Vale – making iron ore’s 34% price deflation this year a relevant concern for the company.

The mine yields a world market share of about 25% of the world’s high purity pig iron, 25% of titanium feedstock (titania slag and rutile) and 33% of the world’s zircon output.

Financial services company Motley Fool stated on Monday that a 10% change in the average price of iron ore could affect Rio’s earnings by $1.2 billion.

‘Rio Tinto is synonymous with iron ore.

‘When 96% of your earnings come from iron ore, then the price you can sell it for becomes incredibly important,’ according to Motley Fool.

While RBM made no immediate comment on the matter, the company’s sustainability report released last Monday declared that tonnage of its beneficiated product ‘showed a market decrease in line with worldwide reduction in demand’.

‘While this has placed us under enormous pressure to reduce costs, it has also provided the opportunity to evaluate our operation and to ensure it is as lean as possible.

‘Long-term forecasts are positive and we are confident that we are well-positioned to respond to an increase in demand, maintaining safety as our highest priority,’ said RBM in the report.