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Iron Ore

Oil, coal and iron ore at financial crisis levels – by Henning Gloystein (Reuters India – December 15, 2014)

http://in.reuters.com/

SINGAPORE – (Reuters) – Tumbling oil, coal and iron ore prices are now all at levels last seen during or before the financial crisis of 2008/2009, signalling not only the impact of a glut of supplies but deeper weakness in parts of the global economy, analysts say.

The raw materials are among the most sensitive to economic health, with oil and coal the world’s two most important energy sources and iron ore used to make steel.

Brent crude prices have almost halved since June to slightly above $60 a barrel, a level last seen in early 2009 during the financial crisis. In the coal market, the benchmark European futures contracts has dropped below $70 a tonne to levels comparable before the boom and bust of 2007-2009.

Iron ore prices have halved to under $69 a tonne as demand growth in the biggest market, China, wanes. Analysts initially pointed to rising oil and mining output, as well as energy efficiency and alternative sources such as renewables, as the main factors behind the drops.

But with no end to the price slide, it became apparent that a significant cooling of emerging economies as well as ongoing slack in developed markets such as Europe and Japan was also at play, especially after oil producer club OPEC said it would not cut output in support of prices.

“Softer global demand, coupled with unprecedented growth in supply are weighing on global oil indices, with prices falling to levels not seen since the Global Financial Crisis,” National Australia Bank said in a note on Monday.

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Iron ore won’t reach $US100 per tonne again, says BHP Billiton – by Philip Wen (The Age – December 12, 2014)

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

Shanghai: Mining giant BHP Billiton says iron ore prices are unlikely to eclipse $US100 a tonne again, with expectations of steel consumption growth in China slowing further next year.

“I’ve learnt never to say never and there’s always short-term variations, but I think that if you use basic economics … certainly $100 seems high,” BHP’s president of iron ore Jimmy Wilson told reporters in Shanghai on Thursday.

“It’s hard to see that significant bump [in demand] that we’ve seen coming from China happen again.” BHP’s senior management group, including chief executive Andrew Mackenzie, was in Shanghai to celebrate the shipping of its one billionth tonne of iron ore to China.

The first shipment departed from Port Hedland in 1973. “It took nearly 30 years for BHP Billiton to ship 100 million tonnes of iron ore to China and then only 12 more years to reach the one billion tonne milestone,” Mr Mackenzie said.

The milestone was testament to China’s extraordinary rate of development, he said. At current rates the next 1 billion tonnes milestone would take just five years to reach.

But though imports into China have surged, prices have nearly halved, dropping under $US70 a tonne for the first time in five years. The drop comes amid a supply glut brought on by aggressive expansion by major miners Rio Tinto, BHP and Vale – even as Chinese economic growth cools.

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Third rail line to Quebec’s north a necessity, says Schefferville – by Marika Wheeler (CBC News Montreal – December 11, 2014)

http://www.cbc.ca/news/canada/montreal

The head of Schefferville says experts have it wrong: there can’t be a Plan Nord without another train line

The administrator of Schefferville says despite what experts say, he believes the Plan Nord — Quebec’s plan for the development of the north — depends on having a third train line to get iron to market.

“If the government wants to have some sort of Plan Nord in the Fosse du Labrador, they have to have a third way to ship the iron to Sept-Îles,” said Paul Joncas.

Transportation represents about 40 percent of production costs for iron mines working in the Labrador Trough along the Quebec-Labrador border. Rail is the only way to transport the millions of tons of iron produced each year.

​There are currently two tracks that run north. One is owned by ArcelorMittal, and runs from Port-Cartier to Fermont. It only carries ore extracted by ArcelorMittal.

The second track runs from Sept-Îles to Schefferville and is owned, in part, by the Iron Ore Company (IOC). That means other companies working in the Schefferville area must pay a competitor to carry their product.

Experts warn waste of money

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Glencore boss slams iron ore sector (The Australian – December 11, 2014)

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

DOW JONES NEWSWIRES – The chief executive of mining giant Glencore, Ivan Glasenberg, again criticised the industry for its over-investment in certain commodities, telling investors that “fortunately we don’t produce iron ore.”

Mr Glasenberg’s apparent distaste for the key steelmaking ingredient comes despite Glencore’s approach earlier this year to Rio Tinto, one of the world’s largest iron ore producers, over a potential tie-up. The approach was rejected and under UK company rules Glencore can’t revive the talks until later next year.

Mr Glasenberg has criticised mining rivals such as Rio and BHP Billiton for continuing to invest in and ramp up iron ore production even though the commodity’s price slumped this year. Speaking at the company’s investor day, he said the reason prices had fallen was that “we’ve all invested too much, we’ve increased supply and unfortunately a big amount has gone in the iron ore market.”

The comments came as benchmark iron ore slid to $US68.90 a tonne overnight, just over 1% above its five-year low. Glencore said it would continue to take a disciplined approach to expanding its production capacity, amid the recent fall in commodity prices.

Mr Glasenberg said “capital misallocation, not a lack of demand, remains a key issue for the sector resulting in a clear need to differentiate by commodity.”

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Province’s hands tied over Wabush Mines – by Ty Dunham (St. John’s Telegram – December 09, 2014)

http://www.thetelegram.com/

Lack of dialogue between Cliff’s and MFC isn’t hopeful: Minister

The answer many have been waiting for may not become a reality, and Wabush Mines will likely be shut down for good. Talks between Cliff’s Natural Resources and MFC Industrial over the sale of Wabush Mines began in July, but the companies haven’t spoken together in weeks, and MFC hasn’t put anything in writing.

Cliff’s is stripping the mine away one piece at a time, honouring a multi-million dollar closure and rehabilitation plan with the financial assurances it can be carried out, according to the Mining Act.

It would cost millions for them to put the brakes on the closure while the MFC merely expresses interest, and Natural Resources Minister Derrick Dalley said the government is in no position to force a company to spend that kind of money.

“We don’t have authority as a government to stop a company from closing,” said Dalley in a recent interview with The Aurora. “For us to intervene, we would be highly concerned it may jeopardize the closure plan and financial assurance that have been provided.”

MFC has yet to provide a business plan, production plan, closure and rehabilitation plan or financial assurance, Dalley noted.

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‘Plan B’ puts Vale back in the driving seat – at a cost – by Samantha Pearson (Financial Times – December 2, 2014)

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

For Vale, the world’s largest producer of iron ore, its location in Brazil has always been both its greatest strength and its biggest challenge.

On the one hand, its proximity to high-grade iron ore mines such as Carajás in the north of the country has turned it into a world leader in the industry and Brazil’s most international company.

Between January and October this year, iron ore ranked as Brazil’s second-biggest export just behind soyabeans, accounting for about 12 per cent of total shipments in value terms.

However, on the other hand, with its biggest mines more than 10,000 miles away from the key Chinese market, its geographical position has been its Achilles heel in its battle with rivals BHP Billiton and the Rio Tinto Group, located in Australia, much closer to Asia.

While demand from China is slowing, the country still accounts for 49.6 per cent of Vale’s total iron ore sales and Asia as a whole represents 65.4 per cent, according to the company’s third-quarter results.

As such, finding ways to reduce the logistics costs of these vast delivery routes has always been one of Vale’s top priorities. As the global commodity supercycle ends, pushing down iron ore prices worldwide, these cuts have become even more important.

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Schefferville, Que., says it’s not ready for a mining boom – by Marika Wheeler (CBC News Montreal – December 8, 2014)

http://www.cbc.ca/news/canada/montreal

Town administrator warns costly work needs to be done now and remote settlement of 230 can’t afford it

The town of Schefferville, Que., said the mining boom is straining the remote northern community’s infrastructure, and it needs help from the provincial government to support the sudden influx of temporary workers.

Schefferville is in northeastern Quebec — a fly-in community due north of Sept-Îles, just a few kilometres from the Labrador border.

It was built near rich iron deposits along what’s known as the Labrador Trough. The mine pits were abandoned about 30 years ago, but a spike in iron prices in 2011 sparked interest in the old sites, and mining companies have returned to the region.

The town population has doubled with “fly-in/fly-out” workers — mining employees who don’t live in town, but fly in for several days, then return home when they get time off. Province should pay for new infrastructure, said town

Schefferville administrator Paul Joncas wants provincial money to pay for major infrastructure investment. “We have work to do on the drinking water system, the sewage system, the infrastructure,” he said. “When the price [of ore] goes up, the mining companies are coming back and they want to go fast.”

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Rio keen to blend mining and marketing – by James Wilson and Neil Hume (Financial Times – December 1, 2014)

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

Pilbara Blend. Robe Valley. Yandicoogina Fines. The names may sound as if they belong on a tea caddy or in a wine cellar – but Rio Tinto investors know better. These are the labels under which the company sells Australian iron ore, the prosaic yet hugely important commodity on which its fortunes depend.

The idea of branding a commodity that is shovelled into blast furnaces to make steel may seem strange. But iron ore has many variations in mineral content and purity.

Miners such as Rio say part of their skill lies in matching ores to the right buyers. Their marketing strategies are therefore crucial to their success – more so this year, when a flood of low-cost supply from Rio and its peers helped to drive the iron ore price down by almost 50 per cent.

Now investors have another important reason to consider Rio’s marketing skills: they are central to a possible tie-up with Glencore, the rival commodities group that this year approached Rio about a potential merger.

Glencore is one of the world’s most successful and entrepreneurial trading companies, spanning commodities such as coal, copper, oil and agricultural products. Its pursuit of a combination with Rio next year may hinge on whether Ivan Glasenberg, Glencore’s chief executive, judges he can extract value from Rio’s iron ore assets – the source of almost 90 per cent of its earnings – with better marketing and trading.

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Brazil’s Vale mulling IPO for part of base metals business – sources – by Nicole Mordant and Euan Rocha (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

VANCOUVER/TORONTO – Dec 1 (Reuters) – Brazil’s Vale SA is considering listing part of its global base metals business, two sources with knowledge of the matter said on Monday, as the miner looks to fund capital projects amid a collapse in iron ore prices.

The sources, who asked not to be named as they have not been authorized to discuss the matter publicly, said the world’s top iron ore producer is likely to retain a majority interest in the new entity if it proceeds with the plan.

Vale could outline the plan to list a new entity in Toronto and London as early as Tuesday at an investor day event being held in New York, said one of the sources.

The event at the New York Stock Exchange will be webcast. The second source said there had been significant discussion inside Vale about listing the base metals assets, which have fared better than its iron ore business due to steadier prices.

A Vale spokeswoman in Brazil could not be reached for comment after hours.

Vale’s iron ore business contributed 62 percent of the company’s gross revenue in the third quarter. Outside of iron ore, Vale’s global asset portfolio includes nickel assets in Canada, Indonesia and New Caledonia, coal mines in Australia and Mozambique as well as copper projects in Canada, Brazil and Zambia.

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Can cost-cutting break Rio Tinto’s link with iron ore price? – by Clyde Russell (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

LAUNCESTON, Australia – (Reuters) – Rio Tinto launched a stirring defense of its iron ore strategy last week, with the basic message that it will still make huge profits even as the price slumps to five-year lows.

Leaving aside, for the moment, that some of Rio Tinto’s price and demand assumptions for the steel-making ingredient still look heroic, the real question to be answered is can the company convince the market that it’s on the right path?

To do so, Rio Tinto will have to break the shackles of the strong correlation of its share price to that of Asian spot iron ore.

Since the 2008 recession the Australian-listed shares of the world’s second-biggest iron ore miner have moved pretty much in lockstep with the price of the steel-making ingredient, although this year the correlation has shown signs of breaking down.

Iron ore has fallen a dramatic 48 percent this year, with the close on Nov. 28 of $69.80 a tonne only marginally above the $68 reached on Nov. 26, which was the weakest since June 11, 2009. Rio Tinto’s shares ended at A$59.10 ($49.64) on Nov. 28, down just 13.3 percent for the year.

The question is whether the nexus between the share price and iron ore has broken or whether the relationship is likely to be restored, most probably by the shares losing value since the prospect of iron ore rebounding is slim given the huge supply overhang in the market.

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Globe-Trotting Vale CEO Faces Wall Street as Iron Plunges – by Juan Pablo Spinetto (Bloomberg News – December 1, 2014)

http://www.bloomberg.com/

Vale SA’s chief executive officer says he travels so much that the mining company’s executive jet is among the most flown in Bombardier Inc.’s fleet this year.

“I like to visit all our operations at least once a year but normally I go more than that,” Murilo Ferreira said in an interview at the company’s Rio de Janeiro headquarters on Nov. 26. “I travel a lot, a lot, a lot,” he said in a weary tone.

Ferreira, 61, will board his Global Express XRS jet to visit investors in New York and London this week, adding to the more than 240,000 kilometers (149,000 miles) flown in the first 10 months of 2014. On the agenda? How the world’s largest iron-ore producer will adapt to a collapse in the price of the commodity that prompted analysts to have the bleakest opinions about the stock since at least 1999.

Vale is producing iron ore at a record pace and its base metals unit — which for years experienced delays, accidents and stoppages — is finally starting to contribute to profits. Yet expanding global supply at a time of slowing demand in China, the largest consumer of metals, has pushed down prices of the steelmaking raw material to the lowest in more than five years and made Vale the worst performing major mining stock.

The reaction from Vale, as with other mining companies, has been to cut costs, put lower-return expansions on hold and focus on its most profitable businesses. The company probably will announce tomorrow a $10.4 billion budget for next year excluding research and development expenses, the lowest since 2009 and 25 percent below last year’s approved capital expenditures, according to the average of nine analyst estimates compiled by Bloomberg News.

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Iron ore prices could stay depressed for 10 years – by Scott Murdoch (The Australian – December 1, 2014)

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

A PROMINENT Chinese fund manager has grimly forecast that the global iron ore price could remain under pressure for 10 years as oversupply continues to hit the market and the Chinese residential property market slumps.

Shanghai Jianfeng vice-president Liang Ruian believes prices could slide below $US60 a tonne within the next year and could even fall to as low as $US50 a tonne, with major consequences for miners around the world.

The iron price on the weekend was $US71.32 a tonne, up $US1.34, but the commodity is down more than 50 per cent this year. The price slide has prompted miners to rethink capital expenditure plans and intensifies pressure on companies struggling to bring projects to the production stage.

Mr Liang, a well known fund manager in Shanghai, said the price of iron ore would be heavily affected by the performance of the domestic Chinese real estate ¬market.

About 30 per cent of China’s steel output is used in residential development, which is forecast to remain flat in the next few years after a surge following the global financial crisis. It is estimated China now has a nationwide inventory of housing to last up to three years.

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Wabush woes: Labrador mining town reels from a China slowdown – by Rachelle Younglai (Globe and Mail – November 29, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

WABUSH, LABRADOR — Ron Barron has spent 30 years working in the Wabush mine, one of three generations of Barrons who have toiled in the open pits in what western Labrador bills as the iron ore capital of Canada.

The family’s roots run deep here. Mr. Barron’s father was one of Wabush‘s first settlers, who not only got a job in the mine when it opened in the 1960s but also helped organize a union. Five of Mr. Barron’s brothers have worked in the same pits along with his son and nephew.

But now Mr. Barron’s life has been upended along with the rest of city. The Wabush mine, once the cornerstone of this community, is shutting down along with another iron ore mine called Bloom Lake in neighbouring Quebec. More than 1,000 miners will be out of work, not to mention a slew of other job losses from businesses that service the industry. It’s a crippling blow in an area with a population of about 9,000.

“Oh my god, everybody loses. All the organizations, the schools, everything loses. Everything will suffer because of it,” said Mr. Barron, who will be officially out of a job by mid-December. “We have had shutdowns and layoffs before, but this is different. The mine is closing.”

The reason for the closings is simple: The price of iron ore, a key ingredient in steel, has been in freefall, falling 60 per cent in three years. Where the resource once traded as high as $190 (U.S.) a tonne in 2011, it is now below $70.

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Iron-Ore Giant Vale Sees Rebound as Glut Squeezes Mines – by Juan Pablo Spinetto and Peter Millard (Bloomberg News – November 27, 2014)

 http://www.bloomberg.com/

Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE5)

The steelmaking raw material, which slumped 49 percent this year to $68.49 a dry metric ton yesterday, will return to an average range of $85 to $90 next year, Chief Executive Officer Murilo Ferreira said in an interview. Prices jumped 2.2 percent today, the most in seven weeks. Vale isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.

“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro yesterday. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”

Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 20 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.

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Iron Ore Caps Monthly Decline as Seaborne Supplies Increase – by Jasmine Ng (Bloomberg News – November 28, 2014)

http://www.businessweek.com/

Iron ore completed a monthly loss as Goldman Sachs Group Inc. said it may cut its forecast of $80 a metric ton for 2015 amid competition among seaborne producers.

Ore with 62 percent content delivered to Qingdao in China slumped 10.4 percent this month after reaching $68.49 a dry ton on Nov. 26, the lowest level since June 2009, according to data compiled by Metal Bulletin Ltd. Prices advanced 1.9 percent to $71.32 today, posting the first weekly gain in six.

The steel-making raw material has plunged 47 percent in 2014 as BHP Billiton Ltd. (BHP), Rio Tinto Group (RIO) and Vale SA expand output in Australia and Brazil, betting the increase will offset slumping prices and force less competitive mines worldwide to close. A property slump and slowdown in investment growth has set China, the biggest buyer, on course for the weakest full-year growth since 1990.

“We believe the risks are clearly skewed to the downside,” Goldman analysts Christian Lelong and Amber Cai wrote in a report e-mailed today. The New York-based bank has kept its prediction unchanged since March 2013. The raw material averaged $99.73 this year.

For now, the bank said it was keeping its average price forecasts unchanged partly because of the uncertainty related to recent Chinese statistics.

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