Iron ore prices to fall in second half of 2013: Rio

Rio Tinto Ltd expects iron ore prices to fall lower in the second half of 2013 in part because of rising exports of the steel-making ingredient from Australia and slowing demand for steel, according to The Australian Financial Review.

The president of Rio's Pilbara iron ore operations, Greg Lilleyman, told an industry conference in Perth that the mix of rising supply and tepid demand is expected to push prices lower.

“We're going to see a number of projects bring supply on around the globe and particularly in the Pilbara,” Mr Lilleyman told the conference, according to the AFR. “We're going to see steel demand growth slowing – I wouldn't say steel demand is slowing – so inevitably, that's going to put some downward pressure on iron ore prices.”

The prospect of depressed iron ore prices later this year is gathering traction, with Goldman Sachs putting Rio on its conviction sell list due to the expectation of lower iron ore prices. Goldman said it expects an average iron ore price of $US80 a tonne in 2015 due largely to oversupply.

The spot price for iron ore rebounded from a low of $US86 a tonne in September to more than $US130 a tonne, which bolstered the outlook for the sector, only to be cooled lately as warnings persist of lower prices to come.

“In terms of iron ore projects around the world, whether they be Rio's or someone else's, inevitably if prices are lower moving forward than the period that we've just come from, they're not going to be easy,” Mr Lilleyman said, according to the AFR. “All projects face significant hurdles with major capital investment and all of the risks that go along with that. With long-run iron ore prices, they are all going to be tough.”