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Iron Ore

‘Terrible timing’: Gina Rinehart bets on iron ore rebound with $13b mine (Sydney Morning Herald – March 18, 2015)

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

Gina Rinehart is digging what will likely be the world’s last big iron ore mine for years to come in the Australian outback. The timing couldn’t be worse for the billionaire mining heiress given tumbling prices and oversupply, but the message for other iron ore miners is clear – the fight for survival is going to get more difficult.

Since construction of the $13 billion Roy Hill mine began four years ago in partnership with South Korean steelmaker POSCO , Japan’s Marubeni Corp and Taiwan’s China Steel Corp, iron ore prices have slumped 70 per cent and forecasters see worse to come.

Blueprints for new mines are being abandoned from Australia to Guinea, with a West Africa mine shelved this month after Ivan Glasenberg’s commodities group Glencore conceded there was no prospect for a “profitable development”.

“If someone was to walk up today and say ‘I want to develop an iron ore mine,’ you’d think they were crazy or know something others don’t,” said James Wilson, an analyst for Morgans Financial in Perth.

Analysts blame a massive rise in production on overestimates of China’s appetite for imported ore by sector titans Vale of Brazil, Rio Tinto and BHP Billiton .

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Fortescue Pulls $2.5 Billion Bond as Price War Hits Iron Ore – by Benjamin PurvisBrett Foley (Bloomberg News – March 17, 2015)

http://www.bloomberg.com/

(Bloomberg) — Fortescue Metals Group Ltd., the world’s fourth-largest iron ore exporter, pulled plans to refinance some of its debt with a $2.5 billion bond as tumbling prices for commodities spook investors.

The stock hit a six-year low in Sydney trading Wednesday, matching the plunge in iron ore and crude oil prices, after the producer said the sale had been scrapped, citing volatile U.S. credit markets and a failure to achieve the terms it wanted.

Iron ore sank 47 percent in 2014 and extended losses this year as surging supplies from Fortescue, BHP Billiton Ltd. and Rio Tinto Group, outpaced demand growth, spurring a surplus just as economic growth slowed in China, the biggest buyer.

“This iron ore capacity war, the race to the bottom was always going to shake the tree and maybe we are starting to see that in earnest,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., said by phone. “And it’s probably going to get worse before it gets better.”

Australia, the world’s biggest exporter of iron ore, on Wednesday cut its price forecast for 2015, saying the raw material will average $60 a metric ton, down from its estimate of $63 in December. Macquarie Group Ltd. overnight cut its forecast for the year by 20 percent to $54.

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Iron ore strategy the road to ‘self-destruction’, warns Cliffs chief – by Paul Garvey (The Australian – March 12, 2015)

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

AUSTRALIA’S big iron ore ­miners are on a path towards “self-destruction” and could leave the country with a case to answer before the World Trade Organ­isation, the head of North America’s largest iron ore miner has warned.

Lourenco Goncalves, chief executive of US iron ore miner Cliffs Natural Resources, yesterday told the Global Iron Ore and Steel Forecast conference in Perth the surge in iron ore supply from producers such as BHP Billi­ton, Rio Tinto and Fortescue Metals could send the price of Australia’s most important export to permanently lower levels.

Iron ore prices have more than halved in the past year as surging production swamped cooling demand, although the key iron ore index rebounded slightly yesterday to end a six-day losing streak.

Mr Goncalves said the price of seaborne iron ore shipped by Australian miners could halve again from about $US60 a tonne to as low as $US30 as a result of the major miners’ expansion strategy. “You call that strategy? I call it self-destruction,” Mr Goncalves said.

On Tuesday, Rio Tinto iron ore chief Andrew Harding and his BHP counterpart, Jimmy Wilson, defended their companies’ roles in the creation of the supply glut, arguing that each tonne of supply they did not deliver would have been filled with lesser-quality ore from elsewhere.

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COLUMN-Who benefits from the iron ore supply glut? Nobody? – by Clyde Russell (Reuters U.S. – March 11, 2015)

http://www.reuters.com/

PERTH, March 11 (Reuters) – One question that skulks like an elephant in a room where the iron ore industry has gathered is who has benefited the most from bulging global supplies.

The Anglo-Australian pair of BHP Billiton and Rio Tinto are happy to tell you how they have successfully ramped up output at costs low enough to still rake in profits.

That was very much their message at this week’s Global Iron Ore & Steel Forecast conference in the Western Australia capital city.

The smaller miners suffering from the collapse in Asian spot iron ore prices are only too willing to speak of their battle to survive amid what they see as the destruction of the value of an industry that is Australia’s largest export earner.

The price of iron ore .IO62-CNI=SI hit its lowest on record on Tuesday, at $58 a tonne, with this year’s decline of 19 percent compounding last year’s slump of 47 percent.

Steel industry officials in China, the destination of two-thirds of the world’s seaborne iron ore, will also tell you how their industry suffers from overcapacity, poor profits and the economy’s shift to consumption-led growth.

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Cliffs Shuns Seaborne Iron Ore as Australia Unit for Sale – by Jasmine Ng (Bloomberg News – March 11, 2015)

http://www.bloomberg.com/

(Bloomberg) — Cliffs Natural Resources Inc., the largest U.S. iron ore mining company, is quitting the seaborne trade in the commodity after the world’s biggest suppliers flooded the market with low-cost output and hurt prices.

The Cleveland-based company will focus on the U.S. market, where demand for steel is increasing, Chairman and Chief Executive Officer Lourenco Goncalves said at an industry conference in Perth, Australia, on Wednesday. The company’s operations in Western Australia are for sale, he said.

Iron ore tumbled 47 percent in 2014 and has extended losses this year as surging low-cost supply from Rio Tinto Group and BHP Billiton Ltd. outpaced demand growth, triggering a global glut. Goncalves, who took over as CEO in August after an activist investor ousted the previous management, has sold mines and rationalized other operations in the face of the slumping prices. Cliffs’ stock lost 71 percent over the past 12 months, and is at the lowest since 2004.

“Here in Australia, we have a very good operation,” said Goncalves. “The asset is for sale, even if someone comes and buys to shut it down, that’s fair game. We’d like to sell to someone that will continue to keep the mine in operation.”

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Iron ore glut hits new highs – by Sarah-Jane Tasker (The Australian – March 6, 2015)

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

PORT Hedland, the world’s largest bulk-export terminal, shipped the most iron ore on a daily basis last month as suppliers increased output through the facility despite the slump in prices.

The latest statistics from the port showed monthly throughput of 48.8 million tonnes of the steelmaking commodity in February — a 6.2 million tonne, or 14.8 per cent, jump on the same period last year. Actual iron ore exports for the month hit 35.6 million tonnes, a 28 per cent hike on last February’s tally.

The push by Rio Tinto, BHP Billiton and Fortescue Metals to increase tonnes into an oversupplied market has continued at a steady pace over the past few years. But the new supply is now hitting the market at a time when the price of the steelmaking commodity continues to fall and China forecasts its slowest growth in more than a decade.

A total of 1.27 million tonnes of iron ore was shipped from Port Hedland each day in February, according to Bloomberg. That surpassed the previous high of 1.21 million tonnes a day in September.

West Australian Premier Colin Barnett has previously accused the major miners of seemingly acting in “concert” with their new supply keeping the iron ore price at record lows, which is hitting his state’s budget.

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BHP Sounds Warning as Casualties Mount in Iron Ore Price War – by Thomas Biesheuvel and Jesse Riseborough (Bloomberg News – February 24, 2015)

http://www.bloomberg.com/

(Bloomberg) — The first fractures are appearing in an escalating iron ore price war that’s putting more producers out of business.

The biggest mining companies led by Rio Tinto Group, BHP Billiton Ltd. and Vale SA have persisted with multi-billion dollar expansion plans, citing still-healthy earnings even in the wake of a price collapse. Now, for the first time, one of the big three has voiced concern they may have gone too far.

“I do fear that other competitors have an awful lot more capital waiting in the wings to invest in expanding,” Andrew Mackenzie, chief executive officer of BHP, the world’s largest mining company, told analysts on a conference call on Tuesday after reporting a 35 percent decline in underlying profit from his iron-ore division. “We do look to the future and see a degree of pressure downwards on iron-ore prices.”

BHP, Rio and Vale have been squeezing smaller rivals in their quest for market share, while demand growth in China, the biggest consumer, slows. From Sierra Leone’s jungle to Sweden’s Lapland, abandoned mines are beginning to dot the global landscape.

“They wanted to make sure no one else entered the market and to maximize their own market share,” said Seth Rosenfeld, an analyst at Jefferies International Ltd. in London. “They’ve now done that as they’re expanding and no one else is.”

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Vale Posts Quarterly Loss Amid Declining Iron-Ore Prices – by Juan Pablo Spinetto (Bloomberg News – February 26, 2015)

http://www.bloomberg.com/

(Bloomberg) — Vale SA, the world’s largest iron-ore producer, reported a second consecutive quarterly loss as prices fell and Brazil’s weakening currency increased debt costs. Shares fell.

Vale’s fourth-quarter net loss narrowed to $1.85 billion, or 36 cents a share, from a record loss of $6.45 billion, or $1.26, a year earlier, the Rio de Janeiro-based company said Thursday in a statement before markets opened.

Vale is boosting iron-ore output to a record, helping to expand a global glut as the top producers squeeze smaller miners for market share amid slowing demand from China. While a declining currency in Brazil and Canada helps Vale cut expenses at its main operations, it boosts the cost of servicing dollar-denominated debt. Foreign exchange and monetary losses curbed profit by $1.26 billion, the company said.

While Vale posted a “solid” performance in its iron-ore unit, the base metals business including nickel and copper operations performed below expectations, Bank of America analysts led by Thiago Lofiego said.

“Base metals posted weak results,” the analysts said in a note to clients Thursday. “A more intense cash-burn due to lower iron ore prices and still-high capex should result in increasing leverage and subdued dividends in the coming years.”

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BHP’s iron ore outlook holds little cheer for small miners – by James Regan (Reuters India – February 24, 2015)

http://in.reuters.com/

SYDNEY, Feb 24 (Reuters) – Global miner BHP Billiton on Tuesday batted away suggestions of a turnaround in iron ore prices anytime soon – a bad omen for smaller producers struggling close to the break even point.

Chief Executive Andrew Mackenzie, releasing BHP’s half-year results, said iron ore demand in the all-important Chinese market was flat, although imports have increased by displacing higher-cost domestic supply.

But as supply costs have fallen, the price – around $62 a tonne – is now “more reflective of the medium-term fundamentals”, he said.

That’s a hefty enough price to keep BHP, the world’s third-biggest iron ore miner, and fellow mega-producers Vale and Rio Tinto in the black but is borderline for smaller rivals.

Atlas Iron, which plans output of about 14 million tonnes in fiscal 2015 against BHP’s 245 million tonnes, posted an underlying net loss of A$139 million ($108 million) for the half-year, against a A$61 million profit a year earlier.

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COLUMN-Iron ore can’t go back to the future to annual pricing – by Clyde Russell (Reuters U.S. – February 23, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Feb 23 (Reuters) – Iron ore should go back to the future and reinstate annual contract pricing, according a former executive of top miner Rio Tinto. He’s wrong.

Mal Randall, who spent more than 25 years at Rio Tinto and also helped set up an Australian iron ore miner, said the move to iron ore spot pricing from 2010 onwards was a disaster, the Australian Financial Review reported on Monday.

Up to a few years ago, iron ore had been priced through annual talks between steelmakers and their largely Australian suppliers. This changed, largely at the behest of former BHP Billiton chief executive Marius Kloppers, who wanted to take advantage of a shortage of supply to generate higher returns for his iron ore mines.

“It was orchestrated and brought in by a guy that has no responsibility now, Kloppers who used to run BHP,” the newspaper quoted Randall as saying. “It’s great to make these changes and then he’s gone.”

Randall, who now chairs mineral sands company MZI Resources, is correct insofar as the spot market pricing is no longer working in the favour of the big miners.

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Cliffs to return to core business – by John Pepin (Mining Journal – February 19, 2015)

http://www.miningjournal.net/

MARQUETTE – The top executive for Cliffs Natural Resources said Wednesday the mining company continues to pursue a “rock solid” revitalization strategy of shutting down and selling off its diverse assets elsewhere, reducing debt, and focusing on iron ore production in the Upper Great Lakes region.

“We are back to basics,” said Lourenco Goncalves, Cliffs’ chairman, president and chief executive officer. “We are back to our business, to our real business, the business that made Cliffs a big company, the business that made Cliffs a powerhouse in the United States and abroad and that is producing iron ore in Michigan and Minnesota and that’s it. That’s our business.”

From coal to chromite, from Australia to Canada and the southeastern United States, under previous board management, Cliffs diversified and expanded.

“Everything else was done through a strategy that was not the best one for the company – that was not the best one for the community that the company serves,” he said. “Lots of money was spent and wasted in bad investments we’re correcting all that.”

Goncalves said Cliffs’ now realizes those “mistakes of the past.”

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Lives Transformed: Education and the Iron Range – by Pamela A. Brunfelt (Home Town Focus – February 20, 2015)

http://www.hometownfocus.us/

Dear Readers,

Earlier this year Pam Brunfelt, distinguished historian, Vermilion Community College instructor and HTF contributor made available, through the Iron Range Resources and Rehabilitation Board, four history articles that she researched and wrote.

One of those pieces, “The Arsenal of Democracy: Minnesota’s Iron Ranges in WWII,” was published in the January 2, 2015, edition of Hometown Focus. This week we’re sharing “Lives Transformed: Education and the Iron Range.”

These, and the remaining two pieces to be shared at a later date (“At the Center of Life: Women on the Iron Range” and “Industrialization and the Iron Range”), collectively comprise the IRRRB project, “Mining Our History.”

All four of Brunfelt’s history pieces can be accessed online at: http://mn.gov/irrrb/DataCenter/History/walk-through-our-history.jsp – Cindy Kujala – HTF Staff Writer

Mining changed the landscape of the Iron Ranges, and mining taxes created one of the finest education systems in the United States. Education served three purposes. First, to provide alternatives to employment in the mines; second, to transform a polyglot immigrant culture into a new Iron Range identity based on American values; and third, to provide a path to citizenship for thousands of immigrants in the first decades of the twentieth century.

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UPDATE 1-Brazil’s Vale beats iron ore forecast, takes nickel crown – by Stephen Eisenhammer (Reuters U.S. – February 19, 2015)

http://www.reuters.com/

Feb 19 (Reuters) – Brazilian miner Vale SA said on Thursday it produced 319.2 million tonnes of iron ore in 2014, beating its forecast for the year, as it begins to boost production after years of stagnation.

Vale, the world’s largest producer of iron ore, produced 83 million tonnes of the steelmaking ingredient in the fourth quarter, an increase of 2 percent from the same period a year earlier.

Full-year iron ore production rose 6.5 percent compared with the previous year, breaking through the 300 million-tonne-a-year mark, where it has been practically frozen since 2007. Vale had forecast output of 312 million tonnes for the year.

The growth in production will be more than offset by falling iron ore prices, which fell by half last year as a massive increase in Australian capacity coincided with a slowdown in China, the main market for iron ore.

Vale took the crown for the world’s biggest producer of nickel from Russia’s Norilsk Nickel, reaching 275,000 tonnes of the ingredient used to make stainless steel in 2014. That was its best performance since 2008, despite falling short of guidance.

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Cliffs CEO: Foreign steel imports are threat to Minnesota mining – by John Myers (Duluth News Tribune – February 16, 2015)

http://www.duluthnewstribune.com/

VIRGINIA — The biggest threat to Minnesota’s taconite industry isn’t the global glut of iron ore mined in other nations but rather the vast amount of foreign steel that’s being imported to build Amercian projects.

That was the warning Monday from Lourenco Goncalves, president and CEO of Cliffs Natural Resources, the largest taconite iron ore producer in the U.S.

Goncalves said no foreign iron ore producer can get their product to U.S. steel mills as efficiently as U.S. producers in Minnesota and Michigan. But the U.S. imported 23 percent of its finished steel in 2013, 28 percent in 2014 “and that number hit 33 percent in January,” Goncalves told Iron Range business and political leaders Monday.

“The biggest issue we have in this country is imports,” Goncalves said at the company’s annual mining breakfast to update the region on Cliffs’ problems and prospects at its three Minnesota operations.

Goncalves said America is experiencing a relatively booming economy — including automobile manufacturing and construction — but that too many of the new projects are being built with foreign steel that is made from iron ore from Australia or Brazil, not Minnesota.

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Commentary: Tough markets demand a rethink of rail in Labrador Trough – by Glen Ireland and Mark Apli (Northern Miner – February 13, 2015)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

During its successful 2014 election campaign, Quebec’s Liberal Party vowed to revive Plan Nord — a cherished blueprint for opening up the province’s vast northern mineral wealth for development. Brainchild of former Liberal Premier Jean Charest, the plan was shelved for two years after his defeat to the Parti Québécois in 2012.

The mining industry has recently given its strong support for Premier Philippe Couillard’s refreshed Plan Nord, which includes an ambitious, greenfield 400+ km multi-user railway corridor and port connecting stranded mineral deposits in the legendary Labrador Trough to Sept-Îles on the coast. Energy and Natural Resources Minister Pierre Arcand, Plan Nord’s helmsman, announced in October 2014 a major technical study of the project by Montreal-based Canarail, whose fees will be paid by Quebec taxpayers and supportive junior miners.

While “Plan Nord redux” now appears to be back on track, some awkward but important questions are being asked: Can an infrastructure mega-project in the Labrador Trough be justified at current, heavily-depressed iron ore prices? And, is a new railway corridor really the only viable logistics solution for planned iron ore mines?

Soon after Premier Couillard’s government took office, a flood of iron ore from newly-expanded mines in Australia’s Pilbara, combined with perceived weakness in core demand markets, drove prices from US$130 per tonne to US$70 per tonne — a five year low.

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