FMG - Fortescue Ltd

Value Collector said:

that’s got to be the silliest statement I have seen for a while.

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yes we have all seen the Apple phones that say “designed in California made in China”

but that in no way takes away from the fact that when you hold an iPhone it is “made in China”

No country is an island, it’s a global economy we all rely on each other to do our bit, and we can all make bucket loads of money doing it, this politics about trying to cut each other off is just silly brinkmanship.

The simple fact is that Australian standard of living is increased by having a strong trading partner like China, and anyone that says we should sacrifice that is in my opinion and idiot.

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Two can play that game, so in that case in my opinion anybody that thinks china is the only trading partner in the whole world is a idiot

Value Collector said:

pretty sure most of our farms had a lot of American and European equipment on them back then still.

whether that John Deere tractor is made in China or America doesn’t bother me, or whether the water pump is made in Berlin or bejing, but to say we have ever been close to self sufficient is just a fallacy.

If we tried to close our borders to trade we would be nothing but a banana republic no where to sell our bananas, we would be like North Korea but with more toothless bogans.

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No one is saying close our borders to trade, we are talking about if China decides to reduce its dependence on our iron ore, which is the more likely outcome.
With China being Authoritarian they can quite easily change their modus operandi, so to think we are immune from China reducing its steel output, is a dangerous assumption IMO.
A lot of companies will already be changing their supply lines, for critical equipment.
By the way, John Deere and Case IH, are made outside of China.

China produces everything because it's the cheapest place to do it. It is competitive through cost, not quality. China is not high-end manufacturing, it's low-end. Ergo, it can be moved pretty easily. This again, makes it vulnerable to any (every) one that can undercut it. Mexico's an excellent example due to simple proximity to its target market. It also means that if you take the economics out of it, if you wanted to return this manufacturing home for political reasons, it would be very easy to do.

Value Collector said:

I will sell you a put option on your shares if you are that worried. (Serious offer)

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Depends on the cost, expiry, & strike. The democrats are in power for the next couple of years so things should get a bit better. I'm not concerned short term. I also haven't said that I think FMG's currently overpriced, I said that the political risk is why it isn't higher. Very different things.

Once the saudi's & iranians start shooting at each other and china's oil supply gets cut off, I'll take you up on your offer

sptrawler said:

No one is saying close our borders to trade, we are talking about if China decides to reduce its dependence on our iron ore, which is the more likely outcome.
With China being Authoritarian they can quite easily change their modus operandi, so to think we are immune from China reducing its steel output, is a dangerous assumption IMO.
A lot of companies will already be changing their supply lines, for critical equipment.
By the way, John Deere and Case IH, are made outside of China.

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They can’t just click their fingers and replace us though, and as I said before, any move to build mines else where would actually produce more demand for iron ore in the intermediate time, and they need an additional 35 million tonnes a year just to cover growth.

John Deere use heaps of Chinese parts, I actually just watched a doco on on of their factories,and the flat steel is bought on the open market, which means would often be coming from China.

againsthegrain said:

Two can play that game, so in that case in my opinion anybody that thinks china is the only trading partner in the whole world is a idiot

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You mean “an” idiot, we all have typos. Haha

I didn’t say they are our only trading partner, but they are our main trading partner, by a long shot.

Value Collector said:

You mean “an” idiot, we all have typos. Haha

I didn’t say they are our only trading partner, but they are our main trading partner, by a long shot.

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I wasn't trying to insult you, sorry if it came across that way.

over9k said:

China produces everything because it's the cheapest place to do it. It is competitive through cost, not quality. China is not high-end manufacturing, it's low-end. Ergo, it can be moved pretty easily. This again, makes it vulnerable to any (every) one that can undercut it. Mexico's an excellent example due to simple proximity to its target market. It also means that if you take the economics out of it, if you wanted to return this manufacturing home for political reasons, it would be very easy to do.





Depends on the cost, expiry, & strike. The democrats are in power for the next couple of years so things should get a bit better. I'm not concerned short term. I also haven't said that I think FMG's currently overpriced, I said that the political risk is why it isn't higher. Very different things.

Once the saudi's & iranians start shooting at each other and china's oil supply gets cut off, I'll take you up on your offer

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I would be happy to take that political risk off your hands, would be happy to do a $25 strike, for $2 per 90 days, which is a bit of a discount from the market price.

Value Collector said:

They can’t just click their fingers and replace us though, and as I said before, any move to build mines else where would actually produce more demand for iron ore in the intermediate time, and they need an additional 35 million tonnes a year just to cover growth.

John Deere use heaps of Chinese parts, I actually just watched a doco on on of their factories,and the flat steel is bought on the open market, which means would often be coming from China.

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That is the assumption I was mentioning, that is dangerous, you are assuming they can't just click their fingers and reduce steel production, when in reality they can if they wish so.
A capitalist country couldn't but a country like China can, on a whim they can cut back growth and infrastructure projects and mothball furnaces it actually is that easy for them.

sptrawler said:

That is the assumption I was mentioning, that is dangerous, you are assuming they can't just click their fingers and reduce steel production, when in reality they can if they wish so.
A capitalist country couldn't but a country like China can, on a whim they can cut back growth and infrastructure projects and mothball furnaces it actually is that easy for them.

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I read a article last week how some chinese cities are rationing energy, e.g no elevators, lights out after a certain time etc. Because of the tariffs on our coal. In Aus or Us this would be a "bloody outrage" but in china you do or disappear - so if they really want to they can

againsthegrain said:

I read a article last week how some chinese cities are rationing energy, e.g no elevators, lights out after a certain time etc. Because of the tariffs on our coal. In Aus or Us this would be a "bloody outrage" but in china you do or disappear - so if they really want to they can

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There will be a reason twiggy Forrest is diversifying out of iron ore, it may be because of flexibility, but generally large companies try to stick to core competencies and divest non core assets.
I'm not saying there is a problem, but to think a problem can't happen, is a bit foolhardy, especially when China is being backed into a corner ATM.
Just my thoughts.

sptrawler said:

That is the assumption I was mentioning, that is dangerous, you are assuming they can't just click their fingers and reduce steel production, when in reality they can if they wish so.
A capitalist country couldn't but a country like China can, on a whim they can cut back growth and infrastructure projects and mothball furnaces it actually is that easy for them.

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reducing Steel production means reducing the over all global steel consumption and slowing total economic activity globally, that’s not going to happen.

Sure they could do it, but they would have to sacrifice a lot of their export industry,not to mention the living standard of 1 Billion of their citizens.

againsthegrain said:

I read a article last week how some chinese cities are rationing energy, e.g no elevators, lights out after a certain time etc. Because of the tariffs on our coal. In Aus or Us this would be a "bloody outrage" but in china you do or disappear - so if they really want to they can

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yep, and I think they are learning from that.

mans if they wish to build more non coal generation, that’s going to take a lot of steel.

China’s roaring industrial rebound from the pandemic has an unforeseen consequence -- the surge in power demand has left factories, office buildings and street lights in some areas straining under an electricity shortage.

The country’s local governments are cutting power to some industrial and commercial customers in several provinces. State-owned companies are sending an army of workers to inspect power lines, and authorities are urging coal miners to produce more.

But that’s done little to quell the stream of domestic media reports on struggling cities. With the rest of the world growing ever-more dependent on China’s medical equipment and electronics exports as their pandemic-ravaged economies suffer, the focus abroad is also increasingly turning to the Asian manufacturing giant’s power supply.

“As the global economy recovers, it will be imperative for China to stabilize its power supplies,” said Rana Mitter, professor of Chinese politics at the University of Oxford. “There is a move in the West to re-shore supply chains and unreliability of power supply in China could be another motivation to do this.”

The world is relying on China’s factories like never before. As one of the first economies to emerge from a pandemic induced lockdown, and as a leading producer of protective gear and medical equipment, China’s exports have soared to record levels. That’s led to surging demand for power, with November consumption up 9.4% over the previous year, the highest level in more than two years.

On top of that, colder-than-normal weather is now adding to winter demand as people heat their homes, and ice is also wreaking havoc on grid infrastructure. Meanwhile, some parts of the country are curtailing electricity to keep emissions in check. That’s left some regions without enough power during peak hours, with two expected to have lasting shortfalls.

“Weather conditions for the following months will be the key factor to determine the scale of the outage,” said Hanyang Wei, an analyst with BloombergNEF. “Peak load would drop quickly if cold weather lasts for just a few days.”

This is all happening as coal, the fuel of choice for a majority of China’s power generation, remains in short supply. The government had limited imports to support domestic miners, and imposed an unofficial ban on Australian shipments amid a diplomatic spat. But domestic supplies haven’t risen as much as needed following a recent spate of deadly mining accidents.

That’s left the country grappling with surging energy prices. Local coal futures have soared to a record, while the costs for natural gas, another heating and power fuel, have also jumped. State-owned energy giants have gone so far as to warn firms against publicly discussing the supply-demand issue on concern prices will rise further, and the government has urged major mining regions to boost output.

Nearly all major cities are facing colder temperatures this winter, with some as much as 5 degrees Celsius below last year’s levels, Morgan Stanley analysts including Sara Chan said in a Dec. 23 research note. This is the main reason behind the surge in coal prices and is helping drive government intervention in power allocation.

In Hunan and Jiangxi provinces, power supplies have been cut to some industrial and commercial customers after demand rose at least 18% from a year earlier and transportation issues curtailed coal supplies, a National Development and Reform Commission official said Monday. Hunan’s power supply could be short by as much as 12%, according to BNEF.

The power crunch “will probably linger as an issue for a couple more months,” said James Stevenson, senior director for coal, metals and mining at IHS Markit. “When you get this short, really what you need to do is curtail demand, and that is what we are seeing.”

Big industrial users are on the front-lines of being cut off from electricity, followed by commercial buildings, in order to keep supply safe for residential consumers, according to BNEF’s Wei said. “Local industries will take a hit if the outage lasts for long,” Wei said.



Result?

Everyone are buying diesel generators to produce their own electricity as the grid can't provide enough of it:


A frigid winter is leading to power shortages in parts of China, driving up demand for diesel as factories rush to install generators to keep the lights on.

Some provinces have started rationing electricity to industrial and commercial users to make sure there’s enough power to heat homes during a colder-than-typical winter. That’s prompting factories to snap up portable generators and the diesel they run on to ensure their plants stay open to meet orders amid record-high exports from the country.

The Chinese meteorological authority earlier issued an orange alert nationwide - the second-highest level in its four-tier system - as a cold wave sweeps through the nation. With temperatures still expected to dip further, grid operators are prioritizing the supply of energy to homes and the community, leaving other customers to scramble for alternative power sources.

“Power cuts have brought us extra orders,” Huang Yu, a sales manager at Shandong Dianyuan Village Power Technology Co., a company that supplies generators of different sizes. “We have been quite busy since November, receiving non-stop orders from customers in Jiangsu and Zhejiang,” she said via phone.

The company, which has a wide range of generators including some large enough to power a small town, has sold more than 20 a day recently, more than triple the normal level, Huang said. Its social media account posted a video Dec. 17 showing trucks loading dozens of power generators getting ready for shipment to power-cut regions.

Wholesale diesel prices in China rose to the highest level since April, according to data from the country’s National Bureau of Statistics. Inventories of the fuel across the country fell 5.26% in the month to Dec. 25 to 20.76 million tons, according to information provider OilChem.

“If there is a shortfall in electricity, diesel is the most responsive energy to fill the gap,” Sengyick Tee, an analyst with Beijing-based SIA Energy said. “Even 0.5% of China’s electricity switching to power by diesel would make a large impact on diesel demand.”

China’s power demand has surged in the second-half of this year as its economy recovered from the pandemic and global demand for protective gear and medical equipment it produces soared. A colder-than-normal winter caused by a La Nina weather pattern added to that, boosting consumption by 11% in December, more than double the growth of a year ago, according to National Development and Reform Commission.

Coal supplies have also been tight amid safety checks at domestic mines and import restrictions, and natural gas has also been rationed to ensure supplies for heating. Governments cut electricity to some businesses in Hunan and Jiangxi provinces because of shortages, while Zhejiang officials also curtailed industrial power in order to meet emissions and efficiency goals for the five-year plan ending Thursday.

Beyond China, low temperatures are also affecting other nations across Northeast Asia. Japan’s spot power price extended its record-breaking rally as utilities struggle to keep pace with higher demand for heating, while South Korea is prepared to release state reserves of kerosene should supply of the heating fuel remain tight.



The green zone band is typically between 500 and 570 yuan ($76 to $87) a ton, but spot prices are now well above 600 yuan and bids are closer to 700, according to analysts. Thermal coal futures on the Zhengzhou Commodity Exchange closed 1.1% lower Friday at 744.6 yuan a ton, and traded at about $34 a ton more than Australian supplies.





China is loving the fact that the west are virtue signaling their way to a self inflicted economic, political, and social controlled demolition, championed and led by our Silicon Valley elites, Gates, Dorsey, Bezos, Zuck and of course employed via the UN thugs led by Klaus and his ilk at the WEF.

China has nearly 250 gigawatts (GW) of coal-fired power now under development, more than the entire coal power capacity of the United States. So when Xi says China will peak…what he is preparing us all for is a massive (they never stopped) and continued investment.

Our Chinese friends now have 97.8 GW of coal-fired power under construction, and another 151.8 GW at the planning stage. And so while some poor sap was penning Xi’s carefully crafted speech to the UN, Xi and his underlings were busy. Busy financing and building out what is likely to be the worlds most impressive global energy infrastructure.

Just this year plants accounting for some 17 GW began construction in China. To put this into context this is more than the total amount approved during the previous two years. But they are not only investing in their backyard. Nope… according to a Boston University database they have made more than $244 billion in energy investments abroad since 2000 with the bulk of that in recent years going into oil and gas.

(Yeah not wind, solar or renewable and recyclable Unicorn farts. Good ol Oil & Gas…)


A healthy $50 billion has gone toward dirty old coal!

They’ve done all of this, and will continue to do more, while paying lip service to “carbon emission reductions”. That our western leaders are as gullible as they are is a tragedy but simply ensures the west is going to end up being a source of houseboys for their Chinese overlords by the next decade. Watch!

The reason is simple and it’s one I’ve repeated more times than I care to count.

No country has political security without energy security.

And energy security is one thing that the liberal hand wringing “we’re all going to die from climate change in 12 years” crowd neither understand, nor care to understand.

That’s how religious-like ideologies work after all.

On the topic of securing political power globally consider this:

It is one thing to develop domestic energy, but that isn’t enough to rule the world. To rule it you need global capacity and leverage over other nations. This was always what the “belt and road” initiative was all about… a trojan horse. That discussion of the Belt and Road has faded from the MSM does not mean it isn’t being pursued. I assure you it continues.

A report in January found that more than one-quarter of coal plants under development outside China have some commitment or offer of funds from Chinese financial institutions. Imagine that.

Keep this in mind. China is the largest consumer of fossil fuels and over the last decade has become the largest financier of the fossil fuel industry.

Here, take a look:



I posted this graph earlier for a reason.


So expect to see China championing and cheering on the West, encouraging them to divest of fossil fuels, encouraging them to keep their economies locked down with Covid hysteria and encouraging the decimation of their economies, and the subsequent political and social mayhem being unleashed.

Why? because if you’re running a race and you’re not the fastest that doesn’t matter if your competition has swapped out their track shoes for concrete boots and iron shackles. Why wouldn’t you encourage them to keep it up…and with vigour.

https://capitalistexploits.at/how-china-is-capturing-global-energy-market-share/


So in other words, it's all a bluff. They aren't even food secure, let alone energy. They import everything. Food, energy, oil, commodities, everything. The entire country is the world's step between raw commodity and industrial steel. That's it. That's all it is. They can't even feed themselves or even keep their own lights on ffs.




The bottom line is that Australia has far, far more leverage here than people realise. If not for the need for the income, AU could shut a quarter of the planet's power stations off virtually over night. Can't make steel without (a LOT of) power, can you?

Folks, let's stay focused on FMG in this thread please. I understand that these are related issues but if the discussion doesn't come back to FMG the thread is going to slowly drift away.

It's great to see such detailed and enthusiastic debate, but try and bring the focus back to FMG to keep the thread on topic. Thanks.

With regard FMG, it will be interesting to see Twiggies next move, after his sojourn over to Europe, my guess is more diversification for FMG.
When Sandfire resources exploration licenses in Africa were torn up, a second string to FMG's bow seems prudent IMO.

I suspect the dividends paid by FMG to Forrest will be employed through Tattarang, the holding company for the Forrest family’s private business interests.

Joe Blow said:

Folks, let's stay focused on FMG in this thread please. I understand that these are related issues but if the discussion doesn't come back to FMG the thread is going to slowly drift away.

It's great to see such detailed and enthusiastic debate, but try and bring the focus back to FMG to keep the thread on topic. Thanks.

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It relates to FMG because china's almost all of its export market, and without electricity, which is overwhelmingly produced by coal, you can't produce steel.

Iron ore exports thus effectively depend on coal exports, which are the lever being used in the soft power being wielded, which is being wielded for political reasons.

Hence me pointing out why FMG is so sensitive to political risk - because china is. There's a reason why twiggy got up on the news a couple of months ago and made that big spiel about not wanting to upset the apple cart that is china etc etc.

As china goes, FMG follows.

Joe Blow said:

Folks, let's stay focused on FMG in this thread please. I understand that these are related issues but if the discussion doesn't come back to FMG the thread is going to slowly drift away.

It's great to see such detailed and enthusiastic debate, but try and bring the focus back to FMG to keep the thread on topic. Thanks.

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Well back to FMG news, It closed today at $25.92 it’s highest close ever, after trading above $26.00 for part of the day.

over9k said:

It relates to FMG because china's almost all of its export market, and without electricity, which is overwhelmingly produced by coal, you can't produce steel.

Iron ore exports thus effectively depend on coal exports, which are the lever being used in the soft power being wielded, which is being wielded for political reasons.

Hence me pointing out why FMG is so sensitive to political risk - because china is. There's a reason why twiggy got up on the news a couple of months ago and made that big spiel about not wanting to upset the apple cart that is china etc etc.

As china goes, FMG follows.

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I thought the discussion was good, and appreciated the points being made. Was just worried that thread drift was setting in and wanted to remind everyone to bring the discussion back around to FMG.

Joe Blow said:

I thought the discussion was good, and appreciated the points being made. Was just worried that thread drift was setting in and wanted to remind everyone to bring the discussion back around to FMG.

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Nah it's relevant. When china's 9/10ths of the market, a discussion about mining is effectively a discussion about china.