Plunging iron ore prices threaten mine closures in Australia

CANBERRA (Scrap Monster):According to Resources consultancy Wood Mackenzie, the sharp fall in iron ore prices leave at least three more mines in Australia at the risk of closure. The consultancy issued red flag on Cliffs Natural Resources' Koolyanobbing mine, Mineral Resources' Carina mine and Grange Resources' Savage River mine.

 

With iron ore prices continuing its downward slide, the profitability gap between the major iron ore producers and the rest of the players have widened. The prices which crashed 47% in 2014 have further declined by another 14% so far this year. The prices had touched $61.10 per tonne last Friday, recording its lowest level since May 2009. The higher cost mines are at the risk of closure if prices drop to less than $60 per tonne, the consultancy added.

 

Earlier in Dec ’14, the consultancy had informed its customers that the above three mills in addition to Arrium's Peculiar Knob mine faces potential risk of closure. The Peculiar Knob mine was mothballed during January this year. Although conditions have shown slight improvement in Dec ’14, the three mines still face severe cost issues. Long road haul distances and significant port fees continue to squeeze margins.

 

According to Wood Mackenzie, the companies had conducted rounds of negotiations with the contractors, as part of cutting costs. However, the talks failed to yield productive results as no savings could be found in the existing contracts.