MARUY Marubeni Corp (PK)

SYDNEY—As iron ore collapses to a decade low, in remote northwest Australia one of the world's richest women is preparing for the first cargo of the commodity from her massive new mine to set sail.

Gina Rinehart's Roy Hill iron-ore mine, which has been years in the making, will pour millions more tons of the steelmaking commodity into the global market at a time when concerns about oversupply have driven prices to US$40 a metric ton for the first time since 2005.

On Thursday, the value of the commodity tumbled 0.7% to US$40.30 a metric ton, according to The Steel Index. That benchmark is down 19% since the start of November, and off nearly 80% since its peak in early 2011.

The spectacular downturn of iron ore—the world's second most traded commodity, after oil—is in part rooted in the massive expansion of mines, such as Roy Hill, in the iron-rich northwest of Australia, where the some of the world's top miners including Rio Tinto PLC are producing ore at record rates.

Citigroup Inc. in September described Mrs. Rinehart's project as an "impending whale" and said shipments from the new mine would help push prices below US$40 a ton.

Rising supplies of the raw material are being met by waning demand in China, the world's top buyer. Steelmakers have begun to cut production in response to a slowdown in demand for the building material that's sent local steel prices to record lows.

China's output declined more than 3% on-year in October, according to the latest data from the World Steel Association, an industry body.

The glut of iron ore is expected to take years to clear. Brazil's Vale SA, the world's top supplier of the commodity, forecasts global iron-ore exports to reach some 1.6 billion tons in 2016—well surpassing the demand it foresees of between 1.35 billion and 1.4 billion tons.

"We expect weak steel [supply-and-demand dynamics], bearish market sentiment and global oversupply to continue to weigh on iron-ore prices," RBC Capital Markets wrote in a note.

The coming weeks will provide a "good litmus test" for traders' confidence in the year ahead, Morgan Stanley analyst Tom Price said. Prices for iron ore often firm up toward the year-end as steelmakers top up stocks before cold temperatures in north Asia hamper trade.

Still, analysts aren't concerned about the future of Roy Hill.

Mrs. Rinehart sold 30% of the unit developing the mine to Asian steelmakers and trading houses including Japan's Marubeni Corp. and South Korea's Posco in 2012, not long after iron-ore prices peaked near US$200 a ton. That eased concerns that there wouldn't be a market for the 55 million tons of iron ore that Roy Hill will produce annually.

Instead, falling prices are expected to put pressure on producers that are smaller or further from Asia, and tend to endure higher costs to dig up and ship their ore to steel hubs such as China.

The Roy Hill project meanwhile cements Australia's dominance of the global iron-ore trade. More than half of all iron ore traded by sea comes from the country's Pilbara region, where Roy Hill is located.

Mrs. Rinehart sealed the largest project-financing deal in mining history when, early in 2014, five export-credit agencies and 19 banks teamed up to provide the US$7.2 billion required to build the operation.

When the first ship started to be loaded with ore earlier this week, Roy Hill Holdings described it as "the culmination of the vision, hard-work and persistence" of Mrs. Rinehart, whose father Lang Hancock is credited with discovering iron ore in the Pilbara mid-last century.

Roy Hill said Thursday it expects the ship to depart some time next week.

Earlier this year, Forbes ranked Mrs. Rinehart as the world's 12th richest woman. As recently as 2012, she was ranked fourth. She is Australia's richest person, worth around $9.5 billion, according to the latest update on the Forbes website.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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(END) Dow Jones Newswires

December 03, 2015 06:55 ET (11:55 GMT)

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