Rio Tinto Group's Sam Walsh said if the second-largest mining company cut iron ore output after prices sank, forfeited supply would be made up by rivals with higher costs, and that wouldn't be in his shareholders' interests.
"Guess what happens when you take 100 million tonnes off?" the chief executive officer said last week, after Rio reported full-year profit that beat estimates, record iron ore production and a US$2 billion ($2.6 billion) share buyback.
"The price goes up, and all those people that went out of the market come back into the market. And guess what? The price gets back to where it was and, whacko, we would be down 100 million tonnes."
The raw material fell 47 per cent in 2014 and extended losses this year as the lowest-cost producers including Rio boosted output and spurred a glut, wagering that less efficient miners will curb supply or shut mines.
The surplus will more than double to a record this year as low-cost suppliers keep expanding, Australia & New Zealand Banking Group said in a report last week, cutting price forecasts through 2018.
