The world’s largest supplier of explosives to the mining industry expects iron ore and coal production to keep climbing even after a plunge in prices.
“In the short- and medium-term, volumes are going to continue to increase, and we’ll be there to satisfy that,” Alberto Calderon, Orica Ltd.’s interim chief executive officer, said Tuesday in a phone interview.
Iron ore shipments from Australia are set to pick up in the second half on mine expansions from the largest suppliers, according to a report last week by UBS Group AG.
Iron ore rallied last month from a decade low as BHP Billiton Ltd. said that it would curb the pace of its expansion and Vale SA signaled it may cut some higher-cost output. Calderon is a former BHP executive.
“Some customers will probably have to cut back, but the bulk of them will just try to operate more efficiently with lower margins,” he said.
While Orica has been forced to trim spending and jobs as its mining customers cope with the downturn in prices, the Melbourne-based company is betting on growth in output.
Rio Tinto Group plans to increase capacity from Western Australia’s Pilbara region to a potential 360 million metric tons a year. While Vale said it will consider cutting as much 30 million tons of output from its most expensive mines, it will continue to pursue its long-term target to grow production.
Orica on Tuesday reported an 8 percent drop in first-half profit and lowered its forecast for explosives volumes citing “difficult” conditions. Explosives volumes for the year are now expected to be about 3.75 million tons, compared with its prior forecast of 3.8 million to 4 million tons.
Orica is focusing on more profitable blasting services after recently selling its chemicals business to Blackstone Group LP for A$750 million ($595 million).
The company is looking for opportunities to help its customers as a “partner,” rather than just as a supplier, potentially through technology to make blasting more efficient, according to Calderon.