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Iron Ore

Quebec prepared to buy rail to help rescue iron-ore mine – by Sonja Elmquist and Frederic Tomesco (Bloomberg News/Montreal Gazette – May 5, 2015)

http://montrealgazette.com/

Quebec is prepared to buy a rail line and port facilities that service a shuttered Cliffs Natural Resources Inc. iron-ore mine to pave the way for the operation to reopen under new owners.

The government also is open to buying 20 percent of the Bloom Lake mine to facilitate a deal, Economy Minister Jacques Daoust said. Purchasing the rail and port facilities could lower the mine’s operating costs by as much as $20 a ton, he said.

“We’re trying to ensure the survival of the mine,” Daoust said Friday in an interview at Bloomberg headquarters in New York. “If the last 20 percent is a problem, I will fix it.”

Cliffs suspended production at Bloom Lake in January and sought creditor protection for the operation. That put pressure on the Quebec government, which wants to boost economic activity in Cote-Nord, a region with 10.7 percent unemployment. Bloom Lake employed about 600 people when it was operational, according to Investissement Quebec, a government agency.

As recently as 2013, Bloom Lake was considered a critical part of Cleveland-based Cliffs’ strategy to build its export business to mitigate its dependence on U.S. customers.

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COLUMN-Iron ore reality check shows small, but significant change – by Clyde Russell (Reuters U.K. – May 4, 2015)

https://uk.finance.yahoo.com/

LAUNCESTON, Australia, May 4 (Reuters) – It’s time for a reality check all round in the iron ore market.

In recent weeks there has been a strong rally in prices, tentative signs that the headlong expansion of capacity will be reined in, calls for a producer cartel of some sorts and a small miner scrappily hanging on in the face of seemingly overwhelming adversity.

All of this makes for great drama and news headlines, but also should lead to questions and analysis as to whether anything has actually changed in the iron ore market.

The first reality check is that despite the near 27 percent rally in the spot Asian iron ore price between April 6 and April 27, the price remains extremely weak.

Iron ore ended last week at $56.20 a tonne, having retreated from the $59.20 reached on April 27, leaving the steel-making ingredient down 21 percent so far this year. It’s also roughly half of what it was this time last year and not much better than a quarter of the record $191.90 a tonne in February 2011.

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Vale ups stakes in iron ore war – by Stephen Bartholomeusz (The Australian – May 1, 2015)

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

Of far greater consequence to Rio Tinto, BHP Billiton and Australia than Andrew Forrest’s complaints about their volume and cost-driven iron ore strategies is what the “other” major seaborne producer does in response to the crash in iron ore prices.

They might be encouraged by the commentary that accompanied Vale’s first-quarter results overnight.

The Brazilian group is the larger of the three major seaborne iron ore producers and is in the midst of an ambitious and expensive ($US17 billion) program to increase its production by 40 per cent, to almost 460 million tonnes a year from last year’s 327 million tonnes.

As with all the other producers, Vale is slashing costs to try to dampen the impact of the dive in iron ore prices and was able to proclaim that, for the first time in its history, cash costs were less than $US20 a tonne. A significant component of the $US13 a tonne reduction in cash costs was a 20 per cent, or $US4.50 a tonne, fall in freight costs.

Vale has traditionally been competitive with Rio (RIO) and BHP (BHP) in production costs and its ore is generally of higher quality. Its disadvantage has been distance from China and the impact that freight costs have had on its landed costs.

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Rio Signals Ready to Step Up on Dealmaking as Market Bottoms – by David Stringer (Bloomberg News – May 1, 2015)

http://www.bloomberg.com/

With the mining sector seen nearing the bottom of the cycle, Rio Tinto Group signaled to analysts it’s ready to resume mergers and acquisitions.

The company is prepared to look for a deal if it can secure the right asset at the correct valuation and win investor backing, Morgan Stanley said after an analysts’ meeting this week with Chief Financial Officer Chris Lynch.

An acquisition would be Rio’s first since 2012, according to data compiled by Bloomberg. As asset valuations get pushed lower, larger producers may be changing their attitude toward deals, according to Argo Investments Ltd.

“If they can buy tier-one assets at valuations that are closer to the bottom of the cycle, then that’s not a stupid thing to do,” said Jason Beddow, chief executive officer of Argo Investments, which manages about A$5 billion ($4 billion) in Australia and holds Rio shares.

The value of completed mining deals fell in 2014 to $51.3 billion, the lowest annual total in 10 years, according to data compiled by Bloomberg.

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Iron ore wars get personal as Rio tells Fortescue to get its house in order – by Michael Smith (Australian Financial Review – April 30, 2015)

http://www.afr.com/

Fortescue Metals founder Andrew Forrest has not been shy about telling Rio Tinto and BHP Billiton how to run their iron ore operations. Rio Tinto’s iron ore boss Andrew Harding is now offering Forrest some advice of his own: get your own house in order and leave us alone.

“The response to that is to fix your own business – not give business advice to others, and definitely not create an environment in Australia where this long-term strategy, which is good for the country, and good for the company, is cast into question,” Harding said in an interview with The Australian Financial Review.

The comments highlight the growing tension between the nation’s three big iron ore producers as the debate about how to manage supply and demand in a low-price environment spills over into the political arena.

It is not the first time Harding has defended the strategy to run the company’s mines at full capacity. But the campaign on both sides is intensifying and becoming more personal.

Harding has made it clear Rio Tinto is not going to blink. He doesn’t believe BHP Billiton has either, despite some contrary interpretations of last week’s decision to defer infrastructure spending at Port Hedland.

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UPDATE 2- Vale posts $3.2 bln loss on iron ore’s relentless fall – by Stephen Eisenhammer (Reuters U.S. – April 30, 2015)

http://www.reuters.com/

(Reuters) – Brazil’s Vale SA , the world’s No. 1 producer of iron ore, on Thursday posted its third straight quarterly loss under pressure from falling prices of the commodity as demand growth from China slows.

The miner reported a net loss of $3.2 billion in the first quarter, compared with a net profit of $2.4 billion in the same period last year. The result compares with a forecast net loss of $2.4 billion according to a Reuters poll.

The first-quarter loss was wider than that in the third and fourth quarters of last year. Vale has been hit by a tumble in the price of the main steel-making ingredient .IO62-CNI=SI, which is near its lowest in a decade having fallen 47 percent in the past 12 months.

Prices have fallen due to huge new capacity from Brazil and Australia that is beginning to flood the market, just as growth slows of Chinese demand for steel.

As well as weaker iron ore prices, Vale said the depreciation of the Brazilian real against the dollar had cost the company $3.02 billion in the quarter.

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Why Africa’s mining industry can weather the commodity-price storm – by Rolake Akinkugbe (Euromoney.com – April 2015)

http://www.euromoney.com/default.aspx

The correction in the global commodity cycle shouldn’t derail investors’ search for new exploration frontiers in sub-Saharan Africa (SSA), given the region’s high-quality mining and metal assets, and still-growing steel demand in China. In any case, efforts to boost local value-added processing should remain on track.

Minds have been refocused on sub-Saharan Africa’s (SSA) mining and metals sector since oil prices began their downward climb in June. Only 18 months earlier, the region’s mining industry had come under heavy scrutiny after a series of labour disputes and worker strikes in South Africa’s mines.

Meanwhile, iron-ore, gold and copper prices have been depressed, raising concerns over export revenues for a number of African mineral producers. Should growth in China, which consumes almost 50% of global metal supplies, stagnate, then Africa’s mining sector could be in for a protracted depression.

However, there is some cause for optimism. Despite global economic uncertainty over the past two years, the budget for non-ferrous metals exploration in SSA has remained relatively robust, helping to underpin continued industry investment.

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Cliffs Natural Resources ‘can’t wait’ to exit ‘horrible’ Australian iron ore business – by Peter Ker (Sydney Morning Herald – April 30, 2015)

http://www.smh.com.au/

US miner Cliffs Natural Resources says the seaborne supply of iron ore to China is a “doomed, horrible business”, and declared it can’t wait to finish mining in Western Australia.

Speaking after a decision to cut jobs and close one of its three iron ore pits in Western Australia, Cliffs chief executive Lourenco Goncalves said big miners like BHP Billiton and Rio Tinto were trying to scare the iron ore market into pessimism with their expansion plans, but could no longer afford those expansions.

Cliffs’ Koolyanobbing operations in Western Australia made a slim profit of $0.26 per tonne during the March quarter, and the Cleveland-based company responded by reducing the remaining life of the operation from 4.5 years down to 3.5 years.

“The seaborne market is doomed, is cursed, is a place not to be in. I can’t wait to get out of Australia,” said Mr Goncalves. “As soon as I get to the end of life of mine in Australia, I’m out of there … I can’t wait to get out of the seaborne trade and let the Australians take that horrible business on their own hands.”

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Ailing Fortescue begins job cuts, hits out at rivals BHP and Rio Tinto – by Andrew White and Andrew Burrell (The Australian – April 30, 2015)

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

Andrew Forrest has accused his two larger rivals, BHP Billiton and Rio Tinto, of jeopardising the budget by driving the iron ore price lower as his Fortescue Metals Group began cutting jobs.

Mr Forrest said the price would be driven lower unless the major producers checked their planned increase in production and stopped saying they intended to continue “oversupplying’’ the market.

“If we don’t get responsibility coming into the future actions and the current statements of the very multinational companies that derive their fortunes from our own land then the iron ore price will continue to fall, the budget will be thrown into jeopardy, the deficit will grow and our standard of living will fall,’’ Mr Forrest told broadcaster Alan Jones yesterday. “And it’s all completely avoidable. None of this had to happen.’’

Mr Forrest has refused to back down on calls for the producers to agree on slowing capacity expansion, despite attention from the Australian Competition & Consumer Commission over the possibility of collusion.

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Iron ore streak extends to nine days – by Daniel Palmer (The Australian – April 29, 2015)

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

Iron ore has continued its march back toward $US60 a tonne in offshore trade amid rising hopes for more stimulus out of Beijing.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US59.20 a tonne, up 0.9 per cent from its prior close of $US58.70 a tonne.

The gains extend a withering run for the commodity that has come as a surprise to many, with a surge of over 25 per cent from its 10-year low of $US46.70 a tonne earlier this month. Much of this recovery has come in the past nine trading days, with iron ore last seeing a red session on April 15.

The developments have allowed for a strong bounce in stock prices within the iron ore sector, with BC Iron and Fortescue Metals leading the way.

The two WA-based miners endured a rare negative session yesterday during the current iron ore streak, with stock in both firms sinking around 5 per cent by the close as the broader market moved lower. Another lift in the commodity’s price overnight, however, leaves them primed to recover much of those losses during today’s trade.

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COLUMN-Iron ore rallies on small BHP output deferral? Ridiculous – by Clyde Russell (Reuters U.S. – April 23, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, April 23 (Reuters) – While it’s well-known that markets can have irrational short-term moves, the 4 percent jump in Asian spot iron ore on Wednesday must be a more extreme case.

Spot iron ore .IO62-CNI=SI jumped to $52.90 a tonne from $50.80 on April 20, continuing its rally from the record low of $46.70 reached on April 2.

On the surface the catalyst for Wednesday’s spike was BHP Billiton’s announcement that it would defer an expansion of its output of the steel-making ingredient from 270 million tonnes a year to 290 million tonnes.

The future loss of 20 million tonnes from a market that’s oversupplied by multiples of that amount clearly isn’t a sound basis for a price rally. What it does show is a market where many participants are keen to call a bottom, and are happy to grasp onto any positive news as justification for a price rally.

It also shows that many in the market weren’t really reading into this week’s quarterly production reports from BHP Billiton, Rio Tinto and Brazil’s Vale.

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Neither Labor nor Liberal has handled WA’s mining boom well – by Larry Graham (Western Australia Today – April 23, 2015)

http://www.watoday.com.au/

Western Australia has a serious problem it needs to deal with. When confronted with unprecedented growth in the mining industry, WA could take the easy political option of spending up big and business as usual, or the more difficult path of others in similar circumstances by putting the windfall revenue away for a rainy day.

When the Barnett Government belatedly opted for a sovereign fund, they chose the one of the worst possible models – and Labor opposed the entire concept. What this bellowed was that neither side of politics understood what was going on around them.

The end results of successive WA governments’ mismanagement of the unprecedented growth are more reminiscent of Nauru than of a progressive economy. It’s easy to jump into political hyper-talk mode and blame the GST and falling iron ore prices for our budgetary woes, however both these events are cyclical and predictable.

With regard to the GST distribution, the recent brouhaha has been a boon to the Premier and the media, but a quick peek at the WA Treasurer Christian Porter’s one and only budget will show that GST revenue has not yet fallen to the levels he predicted in May 2011.

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Iron Range slump appears set to last for a long time – by Lee Schafer (Minneapolis Star Tribune – April 23, 2015)

http://www.startribune.com/

A U.S. Steel spokesman last week emphasized the “temporary” nature of the idling coming at the company’s Keetac and Minntac operations in northeastern Minnesota.

But in looking around at the global industry, it’s shaping up as another of those slumps that sure won’t feel temporary when it’s done. It’s a global industry, and the news is bad all over.

Down in the Indian state of Goa, for example, an export industry that three years ago employed more than 100,000 may never come back. The government put it on hold for environmental reasons, and when it permitted mining to start up again this year there was no more market. Barge captains there can’t even sell their rusting hulks for scrap.

Over in western Australia, a leading market analyst last month asked for one of the iron mining companies to do the decent thing and go out of business. His other hope was that producers finally get serious about forming some sort of cartel to get a production cap, boosting prices. Financial analysts don’t usually openly call for price-fixing and collusion.

The pain isn’t just confined to ore, of course, because it’s just an input for making steel. In a recent steel industry report put out by the big Canadian bank BMO, none of the trend lines were heading up.

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Iron ore price rockets – by Frik Els (Mining.com – April 22, 2015)

http://www.mining.com/

The spot price of iron ore roared ahead on Wednesday despite all three of the biggest producers of the steelmaking material reporting record-setting output growth.

The 62% Fe import price including freight and insurance at the Chinese port of Tianjin added $2.10 or 4.1% to $52.90 a tonne on Wednesday, the highest since end-March according to data provided by The SteelIndex. The iron ore price has recovered 13% since hitting record lows at the beginning of April, but remains down 25% so far in 2015 after almost halving last year.

The jump in the Metal Bulletin’s benchmark 62%-index was even more spectacular tracking gains of 5.9% at the ports of Qingdao-Rizhao-Lianyungang in China to $54.04 a tonne on Wednesday, a four week high. MetalBulletin’s 65% Brazilian index soared $4.00 to a five-week high of $62 a tonne, nearly $7 higher than its record low.

The Big Three iron ore miners – Vale (NYSE:VALE), Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP) – announced record production numbers on Tuesday and Wednesday, emphasizing the devastating effect a surge of new supply has had on the market just as demand from top consumer China is softening.

BHP isn’t putting the brakes on production growth – just making the most of its installed infrastructure to slash costs further.

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UPDATE 4-BHP blinks as iron ore prices fall, delays output boost – by James Regan (Reuters U.S. – April 22, 2015)

http://www.reuters.com/

SYDNEY, April 22 (Reuters) – BHP Billiton is slowing down its expansion plans in iron ore, the first big miner to pull back as a global supply glut sends ore prices tumbling.

The world no. 3 producer said it would delay an Australian port project that would have boosted output by 20 million tonnes and buoyed annual output to 290 million tonnes by mid-2017.

While BHP’s pullback is small compared with overall seaborne iron ore trade of around 1.3 billion tonnes, it is viewed as significant given BHP’s position as an efficient producer.

“It is probably more a symbolic posturing position by BHP, but it also likely signals the bottom of the iron ore market, given this action is being taken by one of the lowest cost producers,” said Mark Pervan, head of commodities for ANZ Bank.

Some analysts said the move suggests BHP expects ore prices to rise later in the decade, when it hopes to control a greater share of the global seaborne trade than it does now.

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