May 27 (Bloomberg) -- Australia's proposed "super" profit tax on mine may delay BHP Billiton Ltd. and Rio Tinto Group iron ore projects for about 12 months, reducing an expected surplus from 2013, Citigroup Inc. said.
"The iron ore market is in deficit until 2012, but tips into growing surpluses in 2013 onwards as supply growth accelerates," Citigroup analysts Clarke Wilkins, Craig Sainsbury and Daniel Seeney said in a client note dated yesterday. "Delaying Australian unapproved projects by 12 months would dramatically reduce the surplus in 2013-14."
Rio, BHP and Fortescue Metals Group Ltd., Australia's three biggest iron ore exporters, are reviewing projects because of the tax. Developments at risk of delay include Rio's planned expansion to 330 million tons by 2015, BHP's rapid growth project six and Fortescue's Chichester and Solomon projects, Citigroup said.
The tax, due to begin in 2012, may keep iron ore price higher than its forecast of $90 a metric ton in 2013, benefitting companies such as Vale SA, Anglo American Ltd., Kumba Iron Ore Ltd. and Sesa Goa Ltd., Citigroup said. The bank expects iron ore to average $120 to $130 a ton in 2001 and 2012.
"The proposed resource super profit tax could significantly alter the timing of the projects in Australia that have yet to be approved, and therefore potentially result in iron ore prices significantly higher than our forecasts," Citigroup said. "The biggest losers overall could be steel mills who pay significantly higher iron ore prices to keep marginal high cost Indian and Chinese producers operating."
BHP rose 2 percent at A$37.99 at 11:01 a.m. Rio climbed 1.6 percent to A$64.95 and Fortescue was steady at A$3.78. Fortescue may be hardest hit from the tax because all of its operations and projects are located in Australia, Citigroup said.