(Updates to add shares in fifth paragraph.)
Oct. 27 (Bloomberg) -- Fortescue Metals Group Ltd., Australia’s third-biggest producer of iron ore, said prices for the steelmaking ingredient won’t drop much more from their lowest level in 15 months.
“I don’t think they’ve got much lower to fall,” Chairman Andrew Forrest said in an interview with Bloomberg Television yesterday. “China has deliberately slowed its own growth to allow its economy to catch up to keep inflation down. You’ll still see growth rates going from 9.7 percent to 9.1 percent. That’s still massive growth.”
Fortescue, controlled by Forrest, Australia’s third-richest person, is spending $8.4 billion to almost triple its export capacity to 155 million metric tons a year. The cash price of iron ore for immediate delivery to China, a benchmark for Asia, dropped the most in more than two years on Oct. 25 as demand from steelmakers waned.
Iron ore prices had their biggest daily fall since Aug. 20, 2009 on Oct. 25, falling 7.2 percent. Iron ore for delivery to the port of Tianjin dropped another 3.3 percent to $127.40 yesterday, according to The Steel Index Ltd.
Fortescue surged 8.9 percent, the biggest gain since May 26, 2010, to close at A$5.03 in Sydney trading, trimming losses so far this year to 23 percent.
The economy in China, the biggest metals consumer, grew at a 9.1 percent annual rate during the third quarter, which was less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists.
Iron ore will probably decline to about $130 a ton by the year-end, Goldman Sachs Group Inc. said Oct. 24. Prices may decline to $120 a ton if steelmaking demand and China’s economy weaken more than expected, Bank of America Corp. said Oct. 25. The price has retreated 27 percent since Sept. 1.
“It’s all about China restricting credit,” Forrest said on the nation’s economic slowdown. “The steel mills have acted in collusion in China. That’s probably spooked a couple of Australian producers or international producers into having to compete with each other.”
BHP Billiton Ltd., the world’s biggest mining company, last week said the slump in prices was due to flagging demand from European steel mills while orders from its largest customer China have so far been unaffected.
“In China overall, which will over the long run be the driver of prices, we have not seen anything really happening there yet,” Marius Kloppers, BHP’s chief executive officer, said Oct. 20.
ArcelorMittal, the biggest steelmaker, has idled plants in Luxembourg, France, Germany and Spain in the past two months.
--With assistance from Elisabeth Behrmann in Sydney and Helen Yuan in Shanghai. Editors: Rebecca Keenan, Jake Lloyd-Smith
To contact the reporters on this story: Jason Scott in Perth at email@example.com; Shraysi Tandon in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Rebecca Keenan at email@example.com