Japanese pull iron ore orders
Japanese iron ore customers are pulling out of supply deals in the wake of the earthquake and tsunami crisis amid reports they are suffering a credit squeeze.
Citi analysts told the Global Iron Ore and Steel Forecast conference in Perth this morning that some Japanese iron ore customers were holding off taking cargoes although they said the Asian country's demand for the steel making commodity should remain strong in the medium to long term.
The analysts said that if Japan's recovery and rebuilding efforts got under way "relatively quickly", it would serve as a "huge boost in [global] demand for iron ore".
"We have seen the Japanese pull back from the market in the short term and we have heard rumours that that has been constrained by credit issues," Citi's analysts told the conference.
"But the back half of this year, I think, is going to be quite strong."
Economists and credit market analysts have questioned how Japan will be able to pay for the massive rebuilding effort, given the country's high level of indebtedness.
There have been unconfirmed reports that the forced shutdown of factories, mills and other manufacturing operations has impacted Japanese companies' cash flow and credit standing.
Japan's steel industry helped underwrite development of the Pilbara's iron ore industry almost 50 years ago and Rio Tinto Iron Ore boss Sam Walsh, also addressing the conference, paid tribute to the Asian country.
"Our partnerships and friendships have thrived over many decades, and our sympathies go out to them at this most difficult time," Mr Walsh said.
"Japan has recovered before and it does so this time with the full support of our industry.
"(But) market conditions remain tight and we are quickly bringing on new supply to meet that demand."
Mr Walsh also used his address to launch a thinly-veiled attack on Fortescue Metals Group.
"Beware those who boast of having more land under lease than any other company, or maps coloured in as fully as the old British Empire once was," Mr Walsh said.
"That isn't mining, that's real estate."
Mr Walsh said it was too early to determine the impact of the Japanese crisis on Rio but warned there was a risk the miner's Pilbara expansion could be affected by a lack of available supplies, like tyres and power equipment, from Japan.
"[But] clearly the world is a big place with alternate suppliers," he said.
Andrew Forrest's Fortescue has regularly talked about its vast Pilbara landholding, the biggest of any company in the region.
Fortescue commercial director Russell Scrimshaw is due to address the conference later this morning.
