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Iron Ore

Why Chevron, Adani, Fortescue show commodity mega-projects era is over – by Clyde Russell (Reuters U.S. – August 6, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 6 (Reuters) – Want a snapshot of the problems facing natural resource companies and why the era of big projects is over? Consider the recent dilemmas of Chevron, Adani and Fortescue Metals in Australia.

The first is battling cost overruns and combative unions in trying to get a multi-billion dollar project ready.

The second is facing yet another delay to the world’s biggest coal-mining development, with a court victory by environmentalists adding to financing challenges amid deteriorating economics.

The third is playing coy about a possible rescue by a Chinese white knight, which could help it survive a severe downturn in the price of its product, largely self-inflicted by overly ambitious expansions within the industry.

The three companies have little in common other than they all operate in Australia and face the challenge of trying to successfully run major projects at a time of unrelenting commodity price weakness.

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COLUMN-Iron ore’s “bull market” shows rise of financial trading – by Clyde Russell (Reuters U.S. – August 3, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 3 (Reuters) – One of the more fanciful notions from the recent rally in iron ore prices is that the steel-making ingredient is now back in a bull market.

Asian spot iron ore .IO62-CNI=SI does meet the technical definition of being in a bull market, having gained 25.4 percent between its record low of $44.10 a tonne on July 8 and the close of $55.30 on July 29.

Markets are said to be in a bull phase when the rally exceeds 20 percent, likewise they are in a bear period when the decline is greater than 20 percent.

Traders are more likely to talk about dead cat bounces than bull runs where iron ore is concerned, and the fact remains that despite the price rally, iron ore remains down 25.7 percent so far this year and is barely a quarter of what it was at its all-time high in early 2011.

The recent gain in spot prices is actually the second technical bull market already this year, following the 40 percent jump between the low of $46.70 a tonne on April 2 and the peak of $65.40 on June 11.

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UPDATE 3-Vale returns to profit, signals cut to 2016 iron ore outlook – by Stephen Eisenhammer(Reuters U.S. – July 30, 2015)

http://www.reuters.com/

(Reuters) – Vale SA, the world’s biggest iron ore producer, returned to profit in the second quarter, bolstered by higher output and cost cuts as it kept up pressure on Australian rivals in its fight for market share.

But as the Brazilian miner battles to increase margins, Vale said iron ore production next year will likely be less than the 376 million tonnes it had previously forecast.

“Probably we’ll be between the guidance we gave… and the 340 million tonnes we are producing in 2015,” iron ore chief Peter Poppinga told analysts on a conference call, adding the company was phasing out higher-cost production.

Vale overcame a slump in iron ore prices to report a net profit of $1.68 billion on Thursday, moving into the black for the first time in a year. That was a jump of 17.3 percent from the same quarter a year ago, and more than four times the average forecast of $408 million of six analysts in a Reuters poll.

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420 on Minn. Iron Range face layoffs as United Taconite idles plants – by Dan Kraker (Minnesota Public Radio – July 30, 2015)

http://www.mprnews.org/

In another blow to Minnesota’s reeling iron ore industry, more layoffs were announced on the Iron Range Wednesday.

Cliffs Natural Resources will be temporarily closing its United Taconite mine in Eveleth and its pellet plant in Forbes. The moves affect 420 employees. The latest news brings the number of layoffs announced this year to more than 1,000.

Eveleth Mayor Bob Vlaisavljevich said he had been nervously awaiting an announcement for weeks, ever since he saw the huge stockpiles of taconite pellets sitting alongside the Duluth harbor, waiting to be shipped to steelmakers.

“It was kind of a scary thought, down by the harbor there. When you see them they’re about a quarter mile long, three or four of them,” he recalled. “A lot of boatloads.”

Cliffs CEO Lourenco Goncalves cited that huge inventory of pellets as one reason the company would idle United Taconite for about six months.

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UPDATE 2-India’s Vedanta looks to restart Goa mines by October – by Aman Shah (Reuters U.S. – July 29, 2015)

http://www.reuters.com/article

MUMBAI, July 29 (Reuters) – India’s Vedanta Ltd said on Wednesday it expected to restart iron ore mining by October in top exporting Goa province and that talks were continuing with regulators for merging with its cash-rich unit Cairn India.

The mining and energy group, which has been hit by a slump in crude prices and mining bans in key producing states, also posted a consolidated net profit of 8.66 billion rupees ($135.61 million) for its fiscal first quarter to June 30.

That compared with a profit of 3.76 billion rupees in the same period last year, which was hurt by a one-time charge of 21.28 billion rupees. Excluding the impact of one-off charge, the company’s first-quarter profit was 35.4 percent lower than a year earlier.

Chief Executive Tom Albanese said on a conference call Vedanta was hoping to get approvals as early as next month to restart a few mines in Goa and was positioned to restart mining at a rate of 5.5 million tonnes a year.

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China air quality crackdown set to hurt iron ore demand – by Michael Roddan (The Australian – July 28, 2015)

http://www.theaustralian.com.au/business

The troubles for the iron ore price are set to continue, with a Beijing crackdown on air pollution in September expected to reduce demand from the region’s steel mills.

Meanwhile, Australian exports of the commodity are set to rebound from a sluggish July, positioning the price of Australia’s biggest export for a renewed plunge, after only recently bouncing from a decade-low.

The Chinese government is likely to limit steel production in Hebei province, which surrounds Beijing and major iron ore port Tianjin, in a bid to ensure higher air quality during World War II commemorations in September, Macquarie Wealth Management says in a research note.

The clear-sky days will be similar to the “APEC Blue” of last November, when the government clamped down on emissions during the 26th annual gathering of Asia Pacific leaders in Beijing.

“Steel mills near Beijing, particularly those in Hebei province, will probably be forced to shut down production again,” Macquarie said in a research note. “This clearly spells trouble for iron ore prices.”

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Andrew ‘Twiggy’ Forrest: A bundle of contradictions – by Stephen Long (Australian Broadcasting Corporation – July 27, 2015)

http://www.abc.net.au/news/

Andrew Forrest is a bundle of contradictions. He is a man who professes his love for Aboriginal people, but plays tough when they stand in the way of his mines.

He is a free-marketeer who went close to arguing for an industry cartel, and a generous philanthropist, who has shackled his charities to his commercial interests. This year, Mr Forrest has been calling for a Parliamentary Inquiry into the iron ore market.

Twiggy is standing up for the battlers and the national interest against “multinationals” BHP and Rio Tinto, he says, who have deliberately driven down the iron ore price.

He has accused them of talking down the price and of pumping out too much volume. Leave aside the inconvenient fact that no company is more responsible for the expansion of iron ore exports in recent years than his.

There is much to admire about the man they call Twiggy (a moniker, owing to his surname Forrest, he has been stuck with since childhood).

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Vale’s Nickel IPO Chances Wane as Fires, Shutdowns Hurt Output – by Juan Pablo Spinetto(Bloomberg News – July 23, 2015)

http://www.bloomberg.com/

A fire in Canada, disruptions in Indonesia and shutdowns in Brazil and New Caledonia: it was tough getting nickel out of the ground last quarter for Vale SA.

Output of the metal at Vale, the world’s largest producer, missed estimates for a second consecutive quarter. The lower-than-expected production comes as a plunge in metal prices makes the Rio de Janeiro-based company’s plan to sell as much as 30 percent of the unit in an initial public offering less likely.

Vale said in its second-quarter output report Thursday that nickel production rose less than 9 percent to 67,100 metric tons, missing a 73,900-ton average forecast by seven analysts surveyed by Bloomberg. The result, called “poor” by BMO Capital Markets in a research note, puts production for the first half at 136,000 tons, or less than 45 percent of the company’s annual target of 303,000 tons.

Operations in the quarter were affected by a fire at its operations in Sudbury, Ontario, which reduced nickel and copper production by 5,000 tons each, furnace maintenance in Indonesia and a “brief shutdown” for plant improvement at the Onca Puma project in Brazil, Vale said. The miner is planning to close facilities at Sudbury and Thompson in August for maintenance, it said.

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[Vale] World’s Top Iron-Ore Miner Presses on Output as Price Slide – by Juan Pablo Spinetto (Bloomberg News – July 23, 2015)

http://www.bloomberg.com/

Vale SA boosted iron-ore production last quarter to the second-highest ever for the company, exceeding analyst estimates and worsening a supply glut that saw prices of the steelmaking ingredient collapse.

Iron-ore output rose 7.4 percent to 85.3 million metric tons in the quarter through June 30, compared with 79.4 million tons a year ago, the company said in a statement Thursday. The result, which excludes third-party purchases and operations at a venture with BHP Billiton Plc, topped the 82.5 million-ton average of eight analyst estimates compiled by Bloomberg.

The Rio de Janeiro-based company, the world’s top iron-ore producer, is expanding supply to a record 340 million tons this year while seeking to replace low-quality ore with premium products to improve profits. The expansion by Vale and its main rivals BHP and Rio Tinto Group coincides with an unexpected decline in demand from China, the biggest iron-ore buyer, prompting Goldman Sachs Group Inc. to forecast weaker prices in incoming quarters.

The increase in Vale’s three main production systems was driven by better-than-expected weather and expanded operations at the N4WS mine and Plant 2 unit in the Carajas complex, Vale said in the statement. Output for the first-half reached a record 159.8 million tons, 6.2 percent more than last year.

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Iron Ore Supply to Overwhelm Weak China Demand, Goldman Predicts – by Jake Lloyd-Smith (Bloomberg News – July 20, 2015)

http://www.bloomberg.com/

Rising seaborne iron ore supplies over the next two quarters will probably overwhelm weak demand from mills in China, according to Goldman Sachs Group Inc., which said that a global glut was entering its second year.

While housing starts in China have recovered and infrastructure has overtaken property to become the largest market for steel, an improvement this half may not be strong enough to support iron ore, the bank said in a report. Prices are seen dropping over the next four quarters, from $49 a metric ton through September to $44 by the April-to-June period of 2016, according to analysts Christian Lelong and Amber Cai.

Iron ore sank to the lowest since 2009 this month amid concern that the biggest mining companies including Rio Tinto Group, BHP Billiton Ltd. and Vale SA are intent on boosting low-cost supply even as demand falters.

Imports by China fell in the first six months of the year, while local mills sold a record amount of output overseas. BHP, which is set to report quarterly production data tomorrow, said on Tuesday it’s spending $240 million to upgrade tug-boat operations at Port Hedland.

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Production cuts by Vale and Rio will not solve iron ore glut – by Neil Hume (Financial Times – July 17, 2015)

http://www.ft.com/home/us

The bruised and battered iron ore industry finally received some good news this week. First, Vale said it would withdraw 25m-30m tonnes of annual production from the market then Rio Tinto cut its total 2015 export forecast by 10m tonnes to 340m tonnes.

While welcome, it would be a mistake to think these announcements mark the beginning of a disciplined response from the industry’s biggest producers to an ongoing supply glut. They don’t.

Take Vale’s “cut”. After its share price jumped more than 6 per cent on the news, the Brazilian miner moved to clarify the remarks made by Peter Poppinga, its executive director of ferrous minerals.

Vale said there was no change to its output guidance for the year of 340m tonnes, or its longer-term target to produce 450m tonnes by 2018. Rather it was cutting production of high cost iron ore — the key ingredient in steelmaking — and replacing it with cleaner, lower cost output from some of its other mines.

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NIRB process will be thorough, Baffinland assures stakeholders (Nunatsiaq News – July 16, 2015)

http://www.nunatsiaqonline.ca/

Mary River dependent on growing its business to international market, company says

Baffinland Iron Mines Corp. got what it wanted earlier this week when the federal government granted the mining company an exemption that will allow its Phase 2 shipping expansion proposal to go directly to the Nunavut Impact Review Board for an environmental review.

But the mining company, which operates the Mary River iron mine in North Baffin, was hesitant about celebrating that news, given the reaction from a number of organizations, who say the request should never have bypassed the regional land use plan.

In a July 15 release, Baffinland said the NIRB assessment process will provide an opportunity for all stakeholders to look at the company’s proposal, which includes the expansion of their iron ore shipping season to about 10 months of the year and an increase in ore production from 4.2 million metric tons to 12 million metric tons per year.

“The project approval process in Nunavut is demanding and thorough, as it should be,” said Baffinland CEO Tom Paddon. “Baffinland’s continuing wish is that the project be given a fair and timely hearing. Proceeding to the environmental assessment process will ensure that occurs,” Paddon said.

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An iron ore civil war plays out on social media in Australia – by James Wilson and Neil Hume (Financial Times – July 16, 2015)

http://www.ft.com/home/us

“Our family. Our jobs. Our future,” is the message conveyed on the Facebook page and Twitter feed. Gazing out from the screen are a blonde woman, two blonde children, a pair of sheepdogs — and a miner wearing overalls.

This is the all-Australian family, with the mining sector at its heart, as envisaged by a campaign called “Our Iron Ore”. It is one of two competing public relations initiatives embroiled in bitter argument in Australia over this abundant commodity.

As the patriotic element of the “Our” campaign suggests, iron ore is anything but prosaic in Australia, whose economy relies heavily on the hundreds of millions of tonnes sucked in annually by China’s steelmaking industry. In Western Australia’s Pilbara region, the iron ore heartland, its price movements are part of everyday conversation.

In 2011, the price of iron ore scaled the heights of $190 per tonne and brought a bonanza for Australia. Four years later, the price has slumped by about 75 per cent: this month it fell below $45/t. Thousands of jobs are being cut and smaller, domestic miners are under pressure.

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UPDATE 2-Miner Anglo warns of up to $4 bln writedown on iron ore and coal assets – by Eric Onstad and Clara Denina (Reuters U.K. – July 16, 2015)

http://uk.reuters.com/

LONDON, July 16 (Reuters) – Mining group Anglo American has warned of a second multi-billion dollar writedown this year on its coal and iron ore assets, demonstrating the growing impact of sliding commodity prices.

The charge of between $3 billion and $4 billion flagged on Thursday, to be taken in its first-half results, comes on top of a $3.9 billion writedown Anglo took for similar reasons in February, when it also posted a 25 percent drop in underlying operating profit for 2014.

Anglo, the fifth-biggest diversified global mining group by stock market capitalisation, is not alone in feeling the pinch of tumbling commodity prices.

BHP Billiton said on Wednesday it will take a $2 billion impairment on its U.S. shale operations, the third writedown in three years.

Anglo has been fighting the impact of struggling metals prices by trying to improve the efficiency of its mining operations and by selling less profitable assets, including coal mines in Australia.

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Vale’s designs on China add to Rio, BHP drive for more iron ore – by James Regan (Reuters U.S. – July 15, 2015)

http://www.reuters.com/

SYDNEY – As Rio Tinto and BHP Billiton ship more iron ore than ever to China, the Australia mining giants face a fightback from Brazil’s Vale for market share that threatens to drive already weak prices even lower.

Rio Tinto and BHP, which will release quarterly production data this week and next, have been racing to keep up exports to boost profits while lower prices eat into margins.

They now face stiffer competition from Vale, which is also working its mines harder, after the world’s biggest producer won approval for its giant Valemax ships to unload in China, cutting down on freight costs.

With a capacity of 400,000 tonnes each, the 34 Valemaxes are the world’s biggest bulk carriers and twice the size of vessels used by Rio and BHP, but a ban on entering Chinese ports had severely curbed the cost efficiencies of the larger ships.

“BHP and Rio have been looking to raise volumes in this environment to maximize every tonne,” said Morgans Financial analyst James Wilson.

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