South Africa-based Kumba Iron Ore Limited, a subsidiary of UK-based mining giant Anglo American Corporation, has announced a reduction in its iron ore production guidance for 2016 from 36 million mt to around 27 million mt, due to the deteriorating price environment. Subject to consultation, it is currently estimated that 2,633 employees and 1,300 contractors may be affected.
According to the company, China’s slowdown in investment expenditure has weighed particularly on prices for metals and minerals. As a result, 2015 marked a year of much weaker demand growth. Iron ore fundamentals deteriorated on the back of declining global demand and growth in low-cost supply, particularly from Australia. Therefore, rapidly changing market and economic fundamentals have resulted in the iron ore price falling faster and deeper than expected. The period ahead is likely to result in formidable changes for the industry with the market now pricing in a more muted trend for the iron ore price. As such, the group does not expect a significant recovery in the iron ore price over the medium term.