Iron Ore

[DB008]

There was a good article in the AFR this weekend regarding FMG.

FMG needs the price of iron ore to be around at '$100 per ton' mark to fund it's mines and service debt levels, but only for he next 12 months or so. l'm sure they will manage, but it will still be interesting to see how they go if...

 

[Smurf1976]

I've been interviewing people for a permanent position (trades) recently.

Suffice to say that I've encountered more than one who has been put off by contractors working for BHP or Rio at iron ore mines in WA as a cost cutting measure.

That says it all really. The big miners are now actively looking to cut costs rather than aiming to maximise production.

 

[DB008]

Fortescue unhappy with iron ore price

Fortescue Metals insists the plummeting iron ore price will rebound but admits it is disappointed by the rapid decline.

Iron ore spot prices have dropped by 50 per cent from the record levels of about $US180 ($A174.70) a tonne in the first half of calendar 2011, and have fallen by 30 per cent over the past two months.

Spot iron ore prices fell $US4.50 to near three-year lows of $US90.30 ($A87.64) on Wednesday, with reports of more falls on Thursday in China.

Iron ore is Australia's biggest export earner.

Major miners BHP Billiton and Rio Tinto, along with Fortescue, are dependent on continued Chinese demand to earn returns on the billions of dollars they have committed to expanding iron ore production in the Pilbara region of Western Australia.
http://news.brisbanetimes.com.au/breaking-news-business/fortescue-unhappy-with-iron-ore-price-20120830-2530b.html

Never seen this site, but the chart looked handy.....

CHART OF THE DAY: The Great Iron Ore Crash Of 2012

Iron ore futures collapsed today, falling 6.7 percent. It's a major component of steel and as such is viewed as one indicator of economic health in China.

As you can see from the charts below, it's been getting crushed for a while. It's at its lowest levels since 2009.
However, JPMorgan analyst Alessandro Abate thinks iron ore is poised for a turnaround. In a note to clients this morning, he writes:

Iron ore spot price: catalysts heading towards a reversal of spot price trend in September. Reasons: 1) recent iron ore spot price decline ($40/t in July/Aug), due to traders’ destocking on high inventory level and lagged recovery of Chinese steel demand; 2) current spot price implies a further reduction of Chinese domestic iron ore output (July at 115mt -8% m/m) going forward, in our view with 3) little sense for traders’ ‘selling frenzy’ at current iron ore spot price; as 4) cut of domestic Chinese steel output (705-710mt Aug annualized, with likely further downside going forward) likely to hit domestic miners and benefit iron ore seaborne traders (shift of demand away from expensive domestic miners’ output).

Shares of Rio Tinto, a major Australian exporter, fell 3.1 percent in London trading today.

Here's the monthly chart:



http://www.businessinsider.com/chart-of-the-day-iron-ore-is-getting-destroyed-2012-8

Question - Will Gina continue with her Roy Hill project?

 

[DB008]

Miners forced to take discounted prices for iron ore

The sharp decline in iron ore prices, and a clouded outlook for the metal, has prompted China to clamp down on excess capacity and begin demanding that Australian iron ore exporters sell their product at discounted rates, according to The Australian Financial Review.
The Chinese government has ordered all steel mills in the country producing less than one million tonnes annually to close in an effort to shut unprofitable capacity.
The prospect of declining Chinese demand has hit Australian miners hard, as they have become increasingly reliant on Chinese state-owned traders to sell stock at a time when the miners are struggling to find buyers for their inventory. The AFR reported that Rio Tinto now sends nearly a third of its iron ore through Sinosteel to stockpiles in China.
“BHP right now is offering cargoes on the spot market but no one will meet their price expectations so mills are going about $US5 below what BHP can offer,” an executive in the raw material import department of a top five Chinese steel mill reportedly told the AFR.

“Rio Tinto right now don't have long-term contracts for buying 30 per cent of their shipments on a regular basis. They are offering cargoes at spot prices to traders just to move the iron ore. Sinosteel is stopping steel mills from bidding, they prefer to buy it from the stockpiles in China."

http://www.businessspectator.com.au/bs.nsf/Article/Miners-forced-to-take-discounted-prices-for-iron-o-pd20120905-XUPQM?opendocument&src=rss

 

[Joules MM1]

The Aussie Debacle Is Signaling A Chinese Hard Landing, As The Iron Ore Market Melts



Anchalee Worrachate, Monami Yui, Bloomberg


Read more: http://www.businessinsider.com/the-...g-a-chinese-hard-landing-2012-9#ixzz27OM4hPiO

Sep. 23, 2012, 7:28 PM

excerpts:

Investors are showing concern that Australia’s economy may slow after the price of iron ore, which made up more than 20 percent of exports last year, dropped as much as 37 percent this year to the lowest level since October 2009.

Fortescue Metals Group Ltd., Australia’s third-biggest producer, cut its spending plans by 26 percent as iron-ore prices declined.

BHP Billiton Ltd, the world’s largest miner, delayed work at the Olympic Dam copper-uranium-gold project in South Australia last month, joining companies including Xstrata Plc and Rio Tinto Group in scaling back expansion.

China’s net exports and investment have “reached their limits,” Ramin Toloui, Pimco’s co-head of emerging markets portfolio management in Singapore, said in a Sept. 13 e-mail.

Australia’s economy grew 0.6 percent in the second quarter from the prior three months, according to a Bureau of Statistics report on Sept. 5, slower than the median estimate of economists for a 0.7 percent gain. Home-loan approvals unexpectedly fell in July by the most in five months.

 

[Joules MM1]

http://www.bloomberg.com/news/2012-...gest-bear-market-in-20-years-commodities.html


Iron Ore Heads for Longest Bear Market in 20 Years: Commodities

By Bloomberg News - Oct 3, 2012 4:27 PM GMT+1000

excerpt

Iron ore’s turnaround is luring some of the world’s most high-profile short sellers, including Jim Chanos, who oversees about $6 billion as the founder and president at Kynikos Associates Ltd. He’s targeted producer Fortescue Metals Group Ltd. (FMG), which at one point made Andrew Forrest Australia’s richest man as iron ore rose more than sixfold from 2001 to 2008 on Chinese demand.

Forrest’s net worth has plunged by 14 percent this year to $3.9 billion, according to data compiled by Bloomberg. More than 97 percent of his wealth is linked to shares of Fortescue. Gina Rinehart, who became Asia’s richest woman after her father discovered minerals that helped create Australia’s iron ore industry, has seen her wealth plunge $1.2 billion, or 5.7 percent, this year to $19 billion, the data show.

 

[VeryGreen]

http://www.bloomberg.com/news/2012-...gest-bear-market-in-20-years-commodities.html


Iron Ore Heads for Longest Bear Market in 20 Years: Commodities

By Bloomberg News - Oct 3, 2012 4:27 PM GMT+1000

excerpt

Thanks for the post Joules!
I read it last friday but popped back in to see if anyone had made any comments today. Some hard times ahead for iron ore perhaps? I know FMG are trying to get all their good stuff which has a 1:1 strip ratio (wastere) but I was looking around and seen Karara calculate a 0.34:1 strip ratio... They have good ore too. As an ex FMG employee I do hope that they stick around for a long while yet. They are doing some good things and they are employing a lot of good people. They just dont appear to be in as good a position as the other iron ore miners.

As a newbie, and someone who has made a tidy living out of iron ore I am interested to hear peoples opinions on where they speculate iron is going.

 

[doctorj]

Interesting - BHP has been buying a little iron ore in the spot markets...

SINGAPORE, Jan 17 (Reuters) - BHP Billiton (NYSE: BBL - news) , the world's No. 3 iron ore miner, bought 100,000 tonnes of the raw material on the spot market in a rare move that traders interpreted as a strategy by producers themselves to stem a decline in prices as Chinese demand thins.

http://uk.finance.yahoo.com/news/1-bhp-buys-iron-ore-095147855.html

 

[Uncle Festivus]

Funny games going on for sure? Not sure how the record shipments of iron ore tally with the global steel glut?

Governments around the world are still building and subsidising steel making facilities in order to provide employment for the voting masses. China has realised that it can't keep subsidising loss making mills while India has only just realised this as well.

I think the latest rise in the IO price is an over-reaction to China's latest 'easing' policies and the general perception that they have avoided the dreaded 'hard' landing, but eventually the price will reflect intrinsic global demand. Or at least till governments run out of (subsidising and or stimulation) money?

 

[Aussiejeff]

Funny games going on for sure? Not sure how the record shipments of iron ore tally with the global steel glut?

Governments around the world are still building and subsidising steel making facilities in order to provide employment for the voting masses. China has realised that it can't keep subsidising loss making mills while India has only just realised this as well.

I think the latest rise in the IO price is an over-reaction to China's latest 'easing' policies and the general perception that they have avoided the dreaded 'hard' landing, but eventually the price will reflect intrinsic global demand. Or at least till governments run out of (subsidising and or stimulation) money?

Per the previous post about BHP buying back it's own previously exported iron ore (presumably to artificially prop up prices that would decline further, hurting future plans?) - maybe this is the beginning of the end of Australia's mining boom? But not China's - I suspect they have many new, cheaper markets in mind to target. They will squeeze Oz for all she is worth.

 

[VeryGreen]

Hi guys,

This arrived i my inbox today. Thought I would share.

The iron ore price may slump 54 per cent to around $US70 a tonne due to a big lift in supply from mining companies, according to UBS analysts.
http://www.miningaustralia.com.au/n...- send -> 27/02/2013 12:57:00 PM&utm_content=

Sorry for the long URL

 

[burglar]

Do we expect the slump to be over any time soon?

 

[pixel]

Do we expect the slump to be over any time soon?

Looks like it: http://www.macrobusiness.com.au/2013/10/daily-iron-ore-price-update-breakout-3/#

 

[burglar]

Looks like it: ...

Thanks pixel,

 

[skc]

Probably the wrong thread to post this, but it's a really interesting article on the cost of capital projects in Australia.

CITIC Pacific’s Sino Iron project produced its much-awaited first shipment of iron ore concentrate in December last year, $US6 billion over budget and four years behind schedule.

CITIC and its principal contractor, the Metallurgical Corporation of China (MCC), severely underestimated the cost of construction in Australia. The budget soared from $US1.75 billion in June 2007 to $US4.3 billion at the end of December 2011.

“We don’t understand the actual conditions of building large mining projects in Australia. We tried to apply our lessons learnt in China locally and severely underestimated the difficulty of the project. As a result, we went on a detour,” Chang told the People’s Daily.

At the peak of construction, CITIC employed 4,000 construction workers and Chinese workers accounted for less than 5 per cent of the total workforce. Chang was further shocked by high wages in Western Australia. He told bewildered Chinese reporters that a truck driver in WA earned $150,000 on average, or about 800,000 yuan (17 times China’s average urban salary).

Business Spectator understands CITIC Resources’ top man in Australia earns roughly the same salary as the truck driver that he employs.

http://www.businessspectator.com.au/article/2014/1/9/china/chinas-shock-and-ore-australian-way

Yes there are lots of poor planning and lack of local knowledge on display here, but it also highlights how uncompetitive Australia is for global investments from a cost perspective.

 

[IFocus]

Yes there are lots of poor planning and lack of local knowledge on display here, but it also highlights how uncompetitive Australia is for global investments from a cost perspective.

Have friends who worked on the project, the Chinese took a heap of short cuts causing a lot of re-work here in Oz.

Still the over run is staggering.

 

[notting]

Lots of brokers calling FMG RIO and the like buys.
Technicals all seem to be failing.
Desperation as they get spanked for the moment it seems.
China IO imports up 10.2% on year but down 5.7% for December and the surplus shrunk and was below expectations for the month. Tell The Bull to add that to their article.

 

[notting]

Lots of brokers calling FMG RIO and the like buys.
Technicals all seem to be failing.
Desperation as they get spanked for the moment it seems.
China IO imports up 10.2% on year but down 5.7% for December and the surplus shrunk and was below expectations for the month. Tell The Bull to add that to their article.

The last time I wrote in here. The Bull was bulling IO for January, which I am sure made for some most unpleasant experiences for some.

Here is what has happened since then 6 months -



Now there appears to be a bit of a bottom forming. Here is some relative picks 2 years -

 

[burglar]

The last time I wrote in here. The Bull was bulling IO for January, which I am sure made for some most unpleasant experiences for some ...

Flinders Mines FMS

 

[notting]

Flinders Mines FMS

They haven't even started producing have they?