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Iron Ore

Indian iron-ore miners rush to steelmaking sector – by Ajoy K Das (MiningWeekly.com July 14, 2015)

http://www.miningweekly.com/page/americas-home

KOLKATA (miningweekly.com) – India’s standalone miners have been galvanized to take a slice of the domestic steelmaking pie.

All large government-owned and managed miners with large iron-ore portfolios have been in touch with their respective controlling authorities seeking to spread their strategic investments into steel production, an official in the Ministry of Steel said.

Every iron-ore, manganese and chrome ore miner was scouting for opportunities to invest in large steel mills, based on the perception that the current downturn in global commodity prices could be prolonged, making it an opportune time for capital investments in downstream production and to hedge against margin erosion from just raw material production, he added.

NMDC Limited, the largest domestic iron-ore miner and under administrative control of the Steel Ministry, has sought government approval to participate in the planned special purpose vehicles (SPVs) for construction of mega steel plants across India’s mineral-rich provinces.

The Steel Ministry has already announced the creation of SPVs in Jharkhand, Chhattisgarh, Odisha and Karnataka to put up steel mills that each have a capacity of about 10-million tonnes a year with an investment of $7-billion to $8-billion riding on each.

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Vale’s Cut Is No Panacea for Iron Ore, Morgan Stanley Says – by David Stringer (Bloomberg News – July 13, 2015)

http://www.bloomberg.com/

Iron ore prices trading near the lowest level since at least 2009 will probably remain under pressure and may even extend declines after Brazil’s Vale SA announced changes to production plans, according to Morgan Stanley.

The world’s biggest producer said on Monday that it would cut about 25 million metric tons of higher-cost supply from this month, while sticking to a full-year output target of 340 million tons.

The decisions are a recognition that the market is oversupplied this year and will probably remain in surplus in 2016, according to Executive Director Peter Poppinga.

“This will not lead to higher iron ore prices in the short term — it could even have the opposite effect,” Morgan Stanley analysts wrote in an e-mailed report. The changes by Vale won’t reduce supply, rather they will add more lower-cost material into the export market, the analysts said.

Benchmark prices are mired in a bear market as Vale and its main Australian competitors — Rio Tinto Group and BHP Billiton Ltd. — increase low-cost production even as demand stagnates in China, spurring a glut.

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Iron ore miners unprepared for challenges, warns BHP – by Paul Garvey (The Australian – July 14, 2015)

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

Australia’s iron ore miners are unprepared for the massive exploration challenges ahead of them, BHP Billiton’s head of iron ore exploration has warned.

Speaking at the AusIMM iron ore conference in Perth on yesterday, BHP’s Joe Knight said current exploration methods would be unable to discover and define the quantity of new ore bodies needed to sustain the Pilbara’s soaring iron ore output.

The Pilbara is home to three of the world’s four largest iron ore miners — BHP, Rio Tinto and Fortescue Metals Group — and exports almost 800 million tonnes of ore a year.

That figure is set to grow to about 965 million tonnes a year by 2017, Mr Knight said, based on the current publicly announced plans of the region’s miners and explorers.

At that rate, Mr Knight said, companies would struggle to replace their mined resources unless they evolved their approach to exploration, given the forecast annual production was the equivalent of more than three so-called “tier one” iron ore deposits.

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Vale Rallies Most in Month Amid Iron-Ore Supply Cut Plan – by Juan Pablo Spinetto (Bloomberg News – July 13, 2015)

http://www.bloomberg.com/

Shares of Vale SA, the world’s largest iron-ore miner, rallied the most in a month as the company presses ahead with plans to cut production and boost profit.

Vale will withdraw output of iron ore by 25 million metric tons starting this month, Peter Poppinga, the company’s executive director for ferrous and strategy, said at an industry conference in Sao Paulo.

The cuts will come from its lower-quality products at its mines in south and southeast Brazil and from third-party purchases, he said.

“Our mantra is not volume at any cost anymore, it’s to maximize margins,” Poppinga told reporters at the event. “It doesn’t mean shutting mines, it means optimizing some production flows at plants.”

The Rio de Janeiro-based miner is moving to trim low-quality output as it focuses on boosting profit amid what it sees as an oversupplied market in 2015, and one that will probably be in surplus next year, Poppinga said.

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Shock and ore: What iron ore’s 10% rebound means – by Nyshka Chandran (CNBC.com – July 9, 2015)

http://www.cnbc.com/

Iron ore’s near 10 percent rebound on Thursday following a horror streak this week left strategists debating whether more pain is in store for the beleaguered commodity.

Benchmark ore for delivery to the Chinese port of Tianjin ended a ten-day rout overnight, rising to $48.30 a ton, a 9.5 percent increase from an all-time record low of $44.10 hit in the previous session.

Major banks like Citigroup remain bearish, predicting prices to fall below $40 a ton this year due to the commodity’s fundamental oversupply. HSBC meanwhile expects prices to trade around $45 during the third quarter. “We expect the market to go into oversupply and shake out mode again,” it said in a report this week.

But some analysts are optimistic.

“A near 10 percent bounce suggests people will think iron ore is now relatively cheap. A market that breaks to new lows and stays low is very weak, but to see such a bounce suggests there’s more comfort.

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Iron ore miners brace for more volatility – by Paul Garvey (The Australian – July 10, 2015)

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

A head-spinning 24 hours in iron ore may only be the start, with investors warned to expect more volatility in the market for Australia’s biggest export.

An early morning panic in response to an unprecedented plunge in the iron ore price yesterday transformed into a surprise rally for Australian iron ore miners as Chinese markets rebounded.

Yesterday had been shaping up as a bloody day for Australia’s iron ore sector following an 11 per cent plunge in the spot iron ore price to just $US44.10 a tonne. Both the closing price and the scale of the fall were the worst seen since the introduction of spot prices in 2009.

But a rally in Chinese markets and a rise in iron ore futures helped Australia’s miners not only recover early losses but, in many cases, close the day higher.

Fortescue Metals Group, having hit a six-year low earlier this week, was the biggest winner with a 6.6 per cent jump to $1.785.

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BHP Billiton and Rio Tinto ready for iron ore’s ‘new normal’ – by Amanda Saunders and Tess Ingram (Australian Finacial Review – July 9, 2015)

http://www.afr.com/

Australia’s big two iron ore miners, Rio Tinto and BHP Billiton, believe the commodity will continue to be a “wealth generation machine for Australia” and expect volatility to recede, despite the heavy price falls in recent days.

Iron ore may be headed for $US40 a tonne after crashing through $US45 on Wednesday night, dropping more than 10 per cent in a single day. But Rio and BHP say they are well prepared for the possible new normal in prices.

Rio Tinto iron ore boss Andrew Harding told The Australian Financial Review that the iron ore price “is moving around its long-term average after coming off an unprecedented high that was never sustainable”. “We are seeing a pattern play out now that is entirely consistent with the history of all internationally traded commodities,” he said.

OPTIMISM LONG-TERM

The miner has cut costs, and prepared its iron ore division “to manage these fluctuations over the long term”. He maintains that the “long-term picture for iron ore remains sound”, and the commodity will “continue to be a wealth generation machine for Australia”.

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Iron ore tumbles amid China contagion – by Neil Hume (Financial Times – July 8, 2015)

http://www.ft.com/intl/markets/commodities

Iron ore, the key ingredient in steelmaking, suffered its biggest one-day fall since records began, dropping by more than 11 per cent to a seven-year low as worries about the Chinese economy continued to mount.

Ore with 62 per cent iron content for immediate delivery to China dropped $5.60 to $44.10 a tonne, according to an assessment from The Steel Index.

That was the biggest one-day percentage drop since TSI begun compiling records for physical iron ore transactions in 2008. Iron is critical to the profitability of several major mining companies such as Anglo American, BHP Billiton, Rio Tinto and Vale.

They have spent billions of dollars expanding their operations to meet expected demand from China but, if the iron ore price were to stay at the current level sustained period of time, it would call into question the ability of miners to fulfil promises of higher return for shareholders.

Over the past year iron ore has dropped almost 55 per cent as a tsunami of new supply has overwhelmed demand.

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COLUMN-Miners paint rosy iron ore picture by skirting tough issues – by Clyde Russell (Reuters U.S. – July 8, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, July 8 (Reuters) – Australia’s major iron ore miners have had a torrid year so far, battling low prices, engaging in an ugly slanging match with each other and dealing with persistent questions about the wisdom of their expansion strategies.

It was therefore not surprising when the mining industry’s peak body launched a report on Tuesday that puts quite a different spin on the iron ore industry.

The Minerals Council of Australia’s report, entitled “Iron Ore: The Bigger Picture”, points out the enormous benefits the industry has brought Australia and will continue to provide.

The major Australian iron ore miners, Rio Tinto and BHP Billiton, are members of the council and sit on the board of directors, but the country’s third-biggest producer, Fortescue Metals Group, is absent from the list.

The report doesn’t really make an effort to explain how the major miners got their forecasts on Chinese demand so wrong, and it glosses over whether they really expected the price to fall as low as it has.

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Iron Ore’s Bear Market May Deepen as Clarksons Forecasts $40 – by Jasmine NgDavid Stringer(Bloomberg News – July 7, 2015)

http://www.bloomberg.com/

Iron ore will probably extend declines after falling back into a bear market on Monday as low-cost supplies from Australia and Brazil are set to expand further this half while demand stumbles in China.

Prices may drop toward $40 a metric ton, according to Clarksons Platou Securities Inc. A deepening slowdown in China’s steel industry and higher iron ore exports from the largest miners are weighing on prices, said Sanford C. Bernstein & Co.

Iron ore’s return to a bear market highlights that the same factors of surging supply and stalling demand growth, which dragged prices to a decade-low early April, remain at the forefront. Recent losses followed figures showing inventories in China rebounded, while exports in June from Australia’s Port Hedland were at a record. The Minerals Council of Australia on Tuesday defended local miners’ policy of adding output, saying cuts would be a failed strategy that would aid competitors.

“Momentum is clearly negative and that is going to be hard to reverse in the immediate short term,” Paul Gait, an analyst at Bernstein in London, said in an e-mailed response to questions. “The revealed preference of the miners is for volume over value, for tons ahead of price.”

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A forest of inconvenient truths on iron ore – by Matthew Stevens (Australian Financial Review – July 6, 2015)

http://www.afr.com/

Andrew Forrest may not like the idea much but there is a good chance that Australian iron ore will generate more national income over the next decade than it did through the 10 years of boom times that came so suddenly to a halt last November.

A report prepared for the Minerals Council of Australia (or Rio Tinto) by Port Jackson Partners predicts that the Pilbara’s powerful iron ore troika along with a subset of much smaller producers will sell $615 billion of iron ore between now and 2025.

That is 40 per cent more than the $430 billion of revenue that those same producers generated through 2005-14, the decade that was punctuated by peak iron ore pricing.

“Australia now has a 50 per cent share of the seaborne market, a share built on vastly expanded production volumes, which now exceed 650 million tonnes per year. This compares with 170 million tonnes in 2000. This will enable the industry to add more value to the Australian economy over the next decade than over the previous 10 years,” PJP predicts.

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REFILE-Iron ore price fall a sign China’s economic might waning – by James Regan and Ruby Lian (Reuters U.S. – July 3, 2015)

http://www.reuters.com/

SYDNEY/SHANGHAI, July 3 (Reuters) – Iron ore prices dropped to the lowest in more than two months on Friday, sending shivers through the mining industry and heightening worries that Chinese economic activity is slowing just as ore piles up at its ports.

China uses more than a billion tonnes of iron ore a year to make steel – 14 times the consumption of the United States – but Beijing’s efforts to shift the economy to consumer-led growth means steel consumption is peaking faster than expected.

“It’s clear China can no longer consume all the iron ore that’s out there, so something’s got to give,” said James Wilson, a sector analyst for Morgans Financial in Perth.

Shares in Australia’s biggest mining houses, including Rio Tinto , BHP Billiton and Fortescue Metals Group led the Australian bourse lower after the price of the raw material fell by 5 percent.

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Iron ore drop, Vale start could make Fortescue Metals a marginal producer – by Amanda Saunders (Australian Financial Review – July 3, 2015)

http://www.afr.com/

Even as Fortescue Metals Group races to hammer down production costs, the leaner miner faces the prospect of becoming the marginal producer of the large iron ore players, once Brazil’s Vale brings its new mega expansion project online, analysts say.

Iron ore crashed spectacularly overnight on Thursday – falling 6 per cent to $US55.63 a tonne – its biggest one-day decline in a year. It snatched back much of the modest recovery made since hitting a record low of $US47 a tonne in early April.

UBS mining analyst Glyn Lawcock told AFR Weekend that “the concern the market has is that the all-in cash delivered price that FMG needs to be cash-neutral is ultimately going to be the dictator of where the long-term price settles”.

Fortescue could become the highest-cost of the large producers – Vale, Rio Tinto and BHP Billiton, and newcomers Roy Hill and Anglo American, he said.

“As more low-cost supply comes on, and high-cost supply is pushed out, ultimately the risk is that Fortescue becomes the most significant size marginal player.

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SPEECH: Experience proves garlands are not distributed for pessimism – by Sam Walsh, chief executive (Melbourne Mining Club – 1 July 2015, London, U.K.)

Sam Walsh is the Chief Executive Officer of London-based Rio Tinto Group, the second largest mining company in the world.

**Check against delivery**

Ladies and gentlemen it’s great to be with you tonight. I think I am the first Melbourne-born boy to address the Melbourne Mining Club here at the historic Lord’s cricket ground.

It’s customary at Rio Tinto to acknowledge Traditional Owners and I would like to pay my respects to the first Australians to play cricket in the United Kingdom in 1868. They were from the Wimmera district of my home state of Victoria.

That match was ten years before a colonial eleven took on WG Grace here at Lord’s in a match completed in just under five hours – which you will be pleased to hear is nowhere near the length of my speech tonight.

It’s been quite a fascinating year so far. A lot of commentary, free expert advice, and even some sledging has come our industry’s way.

With a history stretching back to around the time of those early matches, Rio Tinto people know what it takes to play a long and quality innings. As do many of you in this room.

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Vale Tumbles With Iron Ore Below $60 as Brazilian Stocks Advance – by Denyse Godoy (Bloomberg News – June 30, 2015)

http://www.bloomberg.com/

Vale SA, the world’s largest iron-ore miner, sank to a two-month low on concern that global supplies of the steelmaking ingredient are too high. The Ibovespa posted the best first half of any year since 2009.

Shares of Vale extended their 2015 plunge to 19 percent as Australia cut its price estimates for the commodity, saying the nation’s exports will surge. The raw material dropped below $60 a ton, paring this quarter’s gain to 16 percent.

The slump in iron ore sent a gauge of commodity shares in the MSCI Brazil to the only decline among 10 groups Tuesday. While the industry’s stock swings have abated this month, they reached the highest level since 2011 at the end of May amid a roller-coaster ride in the raw material.

“It’s hard to forecast now where the commodity is going,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said in a phone interview from Sao Paulo. “Vale has fallen a lot because of prospects for iron ore.”

The stock led losses in the Ibovespa, which added 0.1 percent to 53,080.88 at the close of trading in Sao Paulo. Commodity companies account for about a quarter of the stock gauge.

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