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YOUNG_TRADER

YOUNG_TRADER

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Been reading a bunch of articles saying the Indians have introduced an export tax or levy on thei Iron Ore Exports and as a result alot of Chinese Steel Firms, mainly Sino Steel have stopped importing Iron Ore from China,

Looks like they'll be scouring the Aussie Mkt even more now :)
 
it will be great for soon-to-be producers like Territory Iron (TFE) - starting production in May - awesome news
 
YOUNG_TRADER said:
Been reading a bunch of articles saying the Indians have introduced an export tax or levy on thei Iron Ore Exports and as a result alot of Chinese Steel Firms, mainly Sino Steel have stopped importing Iron Ore from China,

Looks like they'll be scouring the Aussie Mkt even more now :)
Click to expand...

Yes, that's right! BHP and Rio will benefit.
 
Have a look at some junior iron ore companies like Strike resources (SRK) - building a large high grade haematite mine in Peru, Aquila resources AQA (Pilbara).
 
Indian ore tax to help Australia
Rowan Callick, China correspondent
March 22, 2007

AUSTRALIA is set to be the major beneficiary, with Brazil, of India's export duty on iron ore - which has already caused Chinese buyers to divert more than 20 ships from India.
India is the main source of the iron ore bought on the spot market by China, which buys more than half India's ore exports.
It is China's chief alternative to the ore bought under the price negotiated in a contract with the big miners in Australia and Brazil. This will rise 9.5 per cent on April 1.

The Indian government introduced the duty, effective from March 1, in its federal budget to hold back more ore for local mills.

The timing was awkward. The duty, passed on to buyers by India's ore suppliers, added more than 10 per cent to the cost of a tonne, just as Chinese mills were seeking to boost imports before the April 1 rise in the contracted price.

The Indian Steel Alliance is lobbying the government to double the new duty swiftly.

The Times of India reports that China's steel industry has threatened to stop importing ore from India altogether.

The biggest Chinese buyer from India, Sinosteel, has pulled out of the market for now.

Indian Steel Minister Ram Vilas Paswan vowed on Tuesday to provide sufficient support for the steel industry - already growing by 10 per cent per year - to raise its output from 43 million tonnes a year to 175 million tonnes by 2020.

"Our iron ore export policy should be based on our domestic needs," he said.

"I am not against export of iron ore, but the needs of the domestic utilities and their expansion plans would have to be factored in. Only after that should exports be allowed."

In 2006, India supplied 22 per cent of China's imported iron ore, with Australia and Brazil providing most of the rest.
 
I'm also interested in small iron ore miners, as friend of mine is seeking to buy iron ore for a Chinese steel mill.

CFE, RHI, SDL and TRF are some of the junior iron ore players on my screen
 
Thsi thread has been rather quiet

I just finished reading this fantastic article and thought it would be of interest


Cheers


BT



Battle Looms In Iron Ore Negotiations

FN Arena News - September 28 2007
By Greg Peel

In 1998, China imported 52 million tonnes per annum of the world's iron ore. In 2004 it imported 208mtpa and Merrill Lynch analysts expect the figure to be 400mtpa by the end of 2007. In 2001 China consumed 20% of the world's traded iron ore. In 2007 it will consume 45% and account for over 75% of global production growth.

Chinese steel production continues to boom. At the end of last month, Macquarie reported panic among China's smaller producers as iron ore prices rose steeply. Stock building at mills had pushed the spot price of iron ore from India up from US$75/t at the beginning of the year to US$140/t at the end of August. Australia does not sell iron ore to China on a spot basis, but rather on an annual contract basis. An annual contract runs for the Japanese financial period of April to March. Negotiations for JFY08 will begin in November.

Over the past several months Australian resource analysts have been slowly pushing up their expectations for a contracted price rise. This had served to significantly push ahead the share prices of BHP Billiton (BHP) and Rio Tinto (RIO). We had a credit crunch correction in between, but now we're back again. The analysts at Merrill Lynch are currently factoring in a 30% price rise for Australian iron ore, but believe a 50% rise is quite possible. But Merrills also suggests that but for a longstanding arrangement, the price rise could justifiably be 100%.

Chinese steel mills are now paying US$171/t on the spot market for India's low-grade iron ore. They pay US$136/t for domestic Chinese ore which is also of a low grade. The highest grade ore comes from Brazil's CVRD and is a necessary ingredient in making steel of sufficient quality. For that the Chinese are paying US$118/t on annual contract. Australia's iron ore is of superior quality but not quite to the level of Brazil's. For Australian ore the Chinese pay only US$78/t.

Which begs the obvious question: If China is so desperate for iron ore that it would pay US$171/t at spot for low quality ore, why are BHP and Rio accepting only US$78/t? To adjust the price upwards towards something more equivalent would be to add literally billions to the bottom line of both companies.

The answer lies in an arrangement between Australia and China which has been in place for 25 years. For starters, both supplier and customer prefer to negotiate annual fixed-price contracts than play games in the spot market. This provides price security to both parties. But most importantly, under the arrangement Australia has always borne the cost of freight. The Chinese boom caught the world by surprise, and immediately exposed a dramatic shortfall in infrastructure development. Part of that infrastructure is sea-going bulk carriers, and the amount of iron ore, coal, and other commodities being shipped across the world has risen much faster than the rate at which new carriers can be commissioned. And to top things off, the price of oil has risen substantially. Thus the cost of freight has risen exponentially, and it is that difference which determines the ultimate price Australian producers receive for their iron ore - much less than domestic ore and significantly much less than nearby Indian ore at spot.

But the obvious flaw in this argument is Brazil. It might be a long way from the coast of Western Australia to Chinese ports, but it's a lot further from Brazil - half a world away. On that basis CVRD should ultimately be receiving much less for its ore than Australia.

However the Brazilians argued the toss with the Chinese early in the piece, and as such managed to negotiate a freight cost sharing arrangement. The further iron ore has to travel, the greater the margin of increase on rapidly rising freight costs. In other words, the greater the cost margin of freight from Brazil over Australia, the greater recompense the Brazilians receive from the Chinese. End result - a higher price for Brazilian iron ore.

So the obvious conclusion here is that Australia is in the box seat. China needs Australian iron ore, so it will have no choice but to pay more for it. The increased price should not only involve a demand premium, but a renegotiation of the freight terms as well. This is why Merrill Lynch can see at least a 30% price rise based on current demand, but can also envisage the scope for a 100% price rise on an equitable freight basis. Australia could double the price of its iron ore, and still be the cheapest on the market after Brazil has negotiated its demand-based price rise. There is, however, one small problem.

The Chinese just won't have a bar of it. This from one recent press report:
"Luo Bingsheng, vice chair of the China Iron & Steel Association (CISA) has said that China will not pay a freight premium for iron ore from Australia. BHP Billiton and Rio Tinto are both expected to ask for more money for their ore in the upcoming negotiations, because its landed cost in China is cheaper than ore from Brazil. CISA anticipates a lengthy and 'difficult' round of price negotiations this year."

Macquarie suggests "Exactly how the negotiations will pan out is difficult to predict at this stage. What seems clear is the negotiations will be long and drawn out and acrimonious (for the Australians)".

Acrimony aside, Merrill Lynch suggests there will never be a better time than now for Australian producers to play their hand and negotiate a better deal. The global iron ore market will remain substantially undersupplied until at least 2011, the analysts believe, and could even remain so out to 2013 depending on how fast Fortescue Mining (FMG) can ramp up. What's more, without a substantial rise the Australians (and the Brazilians) are already facing a loss on currency appreciation. Merrills also believes the Chinese steel industry has the room to pass through increased raw material costs to customers.
And if negotiations are unable to reach a conclusion by June 2008, BHP and Rio can sell iron ore on the spot market.

Merrills has played out some scenarios. Brazil will enter negotiations first, and if CVRD successfully negotiates a 50% increase in price based on demand, then this equates to a US$72/t price leaving Brazil. Add US$70/t for freight, and the price to China is US$142/t. If Australia offers a 20% discount to spot, or a 10% discount to Brazil, the price would be US$128/t. Subtract a Australia-Brazil freight margin of US$28/t and we're left with US$100/t leaving Australian shores. The JPY07 price was US$51/t - hence an almost 100% rise.
This would add US$5.4 billion to Rio's pre-tax and pre-royalty earnings, and US$3.6 billion to BHP's.

Back in JPY05 BHP attempted to push a change to contract structure, but was forced to back down when it received no support form Rio. Rio now has a new CEO who is believed to hold a differing view and is prepared to talk turkey.

So now it's just up to the Chinese.
 
With the recent coverage regarding the Iron Ore contract price re-negotiations (increase?!) happening in November. Do any of you believe that this may further benefit the small cap spec stocks? Maybe even possibly a 'uranium' style rush into stocks that are exploring for iron ore.

Just a thought.
 
eMark said:
With the recent coverage regarding the Iron Ore contract price re-negotiations (increase?!) happening in November. Do any of you believe that this may further benefit the small cap spec stocks? Maybe even possibly a 'uranium' style rush into stocks that are exploring for iron ore.

Just a thought.
Click to expand...

Which ones u thinking of atm?

thx

MS
 
Well the two that I am specifically watching at the moment are JMS & IRM. There are others, but I am not suitably aware of them to comment. There have been a couple of 'explosions' with the SP of small cap spec stocks over the last couple of weeks. It just would appear that the rumblings may become louder as the negotiations draw near.
 
should be a very interesting couple of weeks for a few of the junior iron ore sector players with LML and UMC releasing results on exploration drilling next week, and then TLM following a couple of weeks later.

With so much focus on iron ore due to the supply/demand equation and the upcoming yearly contract talks any decent hits from any of these three companies will send the shareprices racing.

Having indentified POL,IRM,LML as having excellent potential in the iron ore space, I have come accross another beauty that has flown under the radar, and will give the usual heads up once I managed to grab a few myself(so guys and girls check your PM's later on Monday)
 
AQA/HLX drilling results imminent from Yalleen JV. Trying to confirm 100Mt potential, plus numerous other anomalies being tested.

Ramp, ramp. :D
 
So where do members go to get help for serious issues with ramping?

I have 10 infraction points all cause by so called ramping.

Is there a detox house, or therapy room, you know that is all the rage these days (Hollywood):rolleyes:

Maybe I am just another fallen star;)

Back to the issue at hand, was watching Inside Business this morning and Iron Ore is hot hot hot!
 
stockGURU said:
I would recommend going to other forums. :D
Click to expand...
I agree.

STC, If you truly thought that was 'ramping', please go to another forum where you may not recognise humour, or have the required common sence to provide constructive input and feedback.

Or, please stop drinking so early in the day! :rolleyes:
 

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