Twiggy seems to have surprised a few folks with this...

Twiggy seems to have surprised a few folks with this view.......

Forrest sees supply of iron ore outstripping demand
Matt Chambers From: The Australian July 12, 2011 12:00AM

MINING billionaire Andrew Forrest expects iron ore supply to overtake demand, possibly lowering prices in the short and medium term.

The claim from the departing Fortescue Mining chief executive at the Boao resources forum in Perth yesterday was unexpected, as others have emphasised that skills shortages, steel costs and other constraints are crimping the ambitious expansion plans of Fortescue, BHP Billiton and Rio Tinto.

The notion of healthily growing supply was contested by Akio Mimura, chairman of Japan's biggest steelmaker Nippon Steel, who said iron ore supply and the threat of consolidation of miners were his biggest concerns. Mining taxes were another worry.

Mr Forrest, who will become Fortescue's non-executive chairman next week, said China could take comfort in the hundreds of billions of dollars of resource expansions being planned in Australia, given the importance of security of supply to China and other high-growth Asian nations.

"Supply is likely to outstrip demand," Mr Forrest said.

"It may mean that commodity prices may fall in the short to medium term, but I think they'll be strong and still lead to the very necessary win-win situation which Australia needs and Asia needs."

Australia's iron ore production capacity of about 350 million tonnes a year could increase to one billion tonnes a year -- about what the world's total exports are now -- by the end of the decade if BHP, Rio and Fortescue can put their plans into effect on time and on budget.

Mr Mimura, who was speaking through a translator on the same panel discussion as Mr Forrest, said his industry was suffering under high raw material costs, and more needed to be done to meet increased demand for iron ore, which would grow faster than economic growth in developing countries.

"This is not only China and India -- all the other emerging economies are accelerating and there will be a tremendous increase in the demand for energy and resources," he said.

In the past 10 years, Nippon's iron ore price had risen by a factor of 10 and its coking coal price by a factor of eight, he said, while at the same time, iron ore grades were dropping. "Such an increase is a staggering thing for a company, but we are hoping to have increased balance with the suppliers," Mr Mimura said.

"The only way out is innovation and I hope our suppliers will do their best to increase production."

BHP and Rio's failed plan to merge their West Australian iron ore mines, railways and ports last year remains fresh in the minds of Japan's steel industry.

"The biggest issue in front of us is that there are limited players on the supply side and there could be more limited players (with further consolidation)," Mr Mimura, who is also a director of the World Steel Association, said.

While not mentioning Julia Gillard's planned mineral resources rent tax on iron ore and coal, Mr Mimura named increased resource taxes as a worry.

"Once a tax is in place, it will delay the exploration of resources and it will slow down the investment in energy and resources -- this causes us concern," he said.