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Iron Ore

COLUMN-Will the Big 3 iron ore miners have enough time to win price war? – by Clyde Russell (Reuters India – September 24, 2014)

http://in.reuters.com/

LAUNCESTON, Australia, Sept 24 (Reuters) – The recent debate over iron ore has tended to be whether the three mining giants who dominate seaborne supply will win their massive bet that they can drive high-cost producers out of the market.

But a more relevant question is whether they will have the time to achieve their aims. The Anglo-Australian pair of Rio Tinto and BHP Billiton, as well as Brazil’s Vale have flooded the market with their low-cost iron ore, with supply from Western Australia ramping up dramatically in the past year.

This has led to a collapse in the Asian spot price .IO62-CNI=SI to a five-year low of $79.40 a tonne on Tuesday, down 41 percent from the end of last year and 58 percent from the record $191.90 a tonne reached in February 2011.

The main question for the big three is not whether they can drive higher-cost competitors to the wall, but how long their own investors will tolerate the lower earnings as a result of the weak iron ore price.

While the chief executives of the big three haven’t exactly said so in public, they are clearly hoping for a relatively short war and a quick victory, after which iron ore prices will once again rise and stabilise at a higher level. Again, that price level hasn’t been clearly spelt out, but I would imagine the big three have a number in mind somewhere above $90 a tonne, with $110 likely viewed as a ceiling.

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What Australians think about mining – by Dorothy Kosich (Mineweb.com – September 23, 2014)

http://www.mineweb.com/mineweb/

Australians believe mining plays an important role in the prosperity of the nation, but much needs to be done to bolster the industry’s acceptance, trust and support – CSIRO

RENO (MINEWEB) – A CSIRO survey report released Tuesday at the International Mining and Resources Conference in Melbourne, Australia, found “Australians consider that mining is a worthwhile pursuit when you weigh up all the associated benefits and costs”.

However, lead CSIRO researcher Dr. Kieren Moffat noted, “”The survey shows Australians broadly accept mining and that acceptance underpins the social license to operate, but it shows that support is fragile and subject to things like perceptions of mining impacts, governance and the sharing of benefits.”

“Australians across mining, non-mining and metropolitan regions strongly agreed that mining contributes significantly to the economy, to the standard of living, to our way of life and future prosperity,” said Moffat. “Those surveyed in each group also generally agreed that mining creates jobs, opportunities and infrastructures in regions.”

“There are however relatively strong community perceptions that mining impacts negatively on the environment, water quality, agriculture, climate change and the health of local communities,” Moffat advised.

The Australian attitudes toward mining report, authored by Moffat, Airong Zhang and Naomi Boughen, summarizes the findings from a survey of 5,121 Australians about their attitudes toward the mining industry at the end of 2013 and in the first quarter of 2014.

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NEWS RELEASE: Court authorizes 900 M$ lawsuit by the Innu against IOC / Rio Tinto

UASHAT MAK MANI-UTENAM, QC, Sept. 22, 2014 /CNW Telbec/ – The Innu First Nations of Uashat Mak Mani-Utenam and Matimekush-Lac John, whose traditional territory (Nitassinan) covers a large part of North-eastern Quebec and Labrador, celebrated on September 19, 2014 an important legal victory in their 900 million dollar lawsuit targeting the Iron Ore Company of Canada (IOC), whose majority shareholder is Rio Tinto (see press release of March 20, 2013 for more information on the suit).

IOC had tried to have the case dismissed by attempting to convince the Court that the Innu did not have the right to sue IOC and had to rather sue the government. On September 19, 2014, the Honourable Justice Marc-André Blanchard of the Superior Court of Montreal rejected IOC’s motion to dismiss.

Without a doubt, governments played a role in authorizing IOC’s projects despite the lack of consent of the Innu of Uashat Mak Mani-Utenam and Matimekush-Lac John, but IOC’s projects are not some form of public undertaking.

It was IOC, and now Rio Tinto, therefore private investors, who made the decision, without any consideration for the two Innu peoples living on the land since time immemorial, to build and operate a mining megaproject totalling thirty or so gigantic mining pits, a railway 578 km in length and what ended up being toxic port facilities which still contaminate today an area greater than 30 football fields.

“It was not the government that carried out racial discrimination against Innu employees. It was not the government that expelled our women, children and elders from their homeland to make way for IOC’s mines.

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NEWS RELEASE: BAFFINLAND BEGINS MINING IRON ORE – September 22nd, 2014

FOR IMMEDIATE RELEASE: On September 8, 2014, Baffinland began mining and transporting ore to the port site where construction of its Milne Port continues, on schedule, with the intent of shipping first product during the open water season of 2015. Baffinland’s Mary River Project reached this milestone without a single Lost Time Injury during the last three years.

OAKVILLE, ONTARIO, September 22, 2014 – The Mary River Project is located on northern Baffin Island, in the Territory of Nunavut in the Canadian Arctic. It is considered one of the best iron ore projects in development in the world with an ore grade of approximately 67%. Due to the quality of the ore, no processing is required before shipping it to market, reducing overall impact to the environment and keeping production costs low.

An important milestone was reached on September 8, 2014 when Baffinland transported its first load of iron ore to its port site at Milne Inlet. On September 19 there was another reason to celebrate as Baffinland reached a 3 year anniversary without a single Lost Time Injury (LTI).

“This is excellent news,” said Tom Paddon, Baffinland President and CEO. “I am extremely pleased to say that we are now truly a mining company; we have drilled, blasted, crushed and transported final iron ore product to the port at Milne and we have done this with a record of no Lost Time Injuries over a 3 year period; a significant achievement particularly when you consider that we are operating in the high Arctic.

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Big iron miners too bullish on steel growth, says Chinese expert – by Matt Chambers and Barry FitzGerald (The Australian – September 22, 2014)

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

BHP Billiton and Rio Tinto are over-estimating long-term Chinese steel production growth and iron ore prices are unlikely to rise from current depressed levels, according to a senior representative of China’s steel industry.

Li Xinchuang, deputy secretary-general of the China Iron and Steel Association that represents China’s biggest state-owned steel mills, said Chinese steel production, now at about 800 million tones per year, could not grow beyond 900 million tonnes.

“That will be the peak level, we understand it cannot go over 900 million tonnes — we think roughly 800 million to 870 million,” Mr Li said on the sidelines of the International Mining and Resources Conference in Melbourne.

BHP and Rio, who are increasing iron ore production and putting pressure on prices, are both forecasting Chinese steel production will peak at 1 billion tonnes per year or more. “It cannot, trust me, I have been in the business 30 years,” he said.

Asked whether BHP and Rio misunderstood China, Mr Li said: “Maybe they keep that story for investors, I don’t know.” Mr Li, who is also president of the China Metallurgical Industry Planning and Research Institute, said the figure was based on previous steel use rates when industrialised nations like the US and Japan peaked in their steel use.

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Iron ore mafia flourish despite police action – by Naresh Chandra Pattanayak (Times of India – September 18, 2014)

http://timesofindia.indiatimes.com/international-home

KEONJHAR: The authorities in the past few days have crack down on iron ore smugglers in Keonjhar district, making several seizures of illegally-extracted ore. However, such action has done little to daunt mineral mafia of the region.

Sources alleged that authorities here are hand in glove with the ore smugglers and arrest only the small fish, allowing actual criminals to operate freely.

On Friday, 130 MT of illegally extracted ore was seized from Dumirta village in Sidhamatha reserve forest. On Thursday, 309 MT of iron ore was recovered from the reserve forest. On Wednesday, the mining department seized 400 MT ore from Murga-Bilepada road near Deojhar railway siding.

Around 839 MT iron ore worth Rs 20 lakh have been seized from Joda mining area in the past few months. Police and mining department officials have also seized several tippers, trucks and light vehicles carrying stolen iron and manganese ore.

Despite multiples raids in various forest areas to curb mineral theft, mineral mafia are continuing their activities in Joda, Bamebari, Rugudi, Barbil and Bolani police limits with impunity. Illegal mining is rampant in Sidhamatha, Kundurpani, Roida, Chormalda,Thakurani, Mahaparvat, Kalaparvat, Tankura, Murga reserve forest and some mining leased areas that are lying abandoned.

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Mining giants may hoard cash as iron ore prices sag – by Sonali Paul (Reuters U.S. – September 16, 2014)

http://www.reuters.com/

MELBOURNE, Sept 17 (Reuters) – Sagging iron ore prices raise the prospect the world’s biggest miners will shelve plans to return excess cash to shareholders in February, despite promises to investors who had hoped to reap the benefits of two years of austerity.

Stung by slower growth in China, global miners have reined in expansion plans and brought in new management to sell assets and drive their mines harder, raising hopes that BHP Billiton alone could hand back up to $8 billion to investors.

In the August reporting season, Glencore kicked off the expected party with a $1 billion share buyback, world No. 2 iron ore miner Rio Tinto flagged it would be in a strong position to return capital in February, and BHP said a move was “close”.

But iron ore prices have collapsed to five-year lows since then, thanks to the major miners flooding the market with new supply and high-cost miners in China continuing to produce, defying expectations the market would bottom around $90 a tonne.

If prices remain below $90 for the rest of the year, BHP and Rio, both looking to keep their single ‘A’ credit ratings, would be hard-pressed to return capital to shareholders, beyond raising their dividends, debt and equity analysts said.

“At the moment, there’s a lot of cash flow at risk relative to history because of commodity price volatility, not just in iron ore, any spot price exposure. You can’t pre-emptively give back cash in this environment,” said Paul Phillips, a partner at fund manager Perennial Growth Management.

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As mining curbs bite, India offers market to glut-hit iron ore – by Manolo Serapio Jr. (Reuters India – September 16, 2014)

http://in.reuters.com/

SINGAPORE – (Reuters) – An oversupplied global iron ore market may find some relief from an unlikely source as former No.3 exporter India turns into a big importer due to a cutback in domestic production.

The country may ship in up to 45 million tonnes over the next three years as home-grown iron ore output falls short of domestic steel production needs, an executive at an influential industry group said.

India imported just 0.37 million tonnes of the steelmaking raw material in 2013/14, government data showed. But already JSW Steel, India’s third-largest maker of the alloy, has said it will import 6 million tonnes of iron ore in 2014/15 against zero a year earlier.

“There’s no option but to import to meet the shortfall. We’re looking at between 10 and 15 million tonnes every fiscal year over the next three years,” Basant Poddar, vice president of the Federation of Indian Mineral Industries, the only industry group for mining firms in the country, told Reuters by phone.

“The mine closures all over India, starting from Karnataka, Goa, Odisha and Jharkhand, have created a massive disruption to supply,” Poddar said.

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Rinehart rejects talk of Korean raid on Roy Hill – by Andrew Burrell (The Australian – September 16, 2014)

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

GINA Rinehart’s Hancock Prospecting has rejected speculation that Korea Development Bank is planning to buy a 5 per cent stake in the magnate’s flagship $10 billion Roy Hill iron ore project in the Pilbara.

A report published yesterday by a Seoul-based industry journal said the state-owned bank was planning to purchase the stake in partnership with Korean pension fund firms and insurance companies for 170 billion won (about $180 million).

The market value of Roy Hill is likely to have slumped in recent months given the weaker outlook for iron ore prices, which have plunged to $US82 a tonne, although the low-cost Roy Hill project would still be profitable at current prices. The report in the Korea IT Times appeared to suggest that Korea Development Bank would buy the stake from Hancock Prospecting.

“There is absolutely no truth to the report,” said a spokesman for Hancock Prospecting, Mrs Rinehart’s private company. Hancock Prospecting owns 70 per cent of Roy Hill, while Japan’s Marubeni has 15 per cent, South Korea’s Posco holds 12.5 per cent and Taiwan’s China Steel Corp has 2.5 per cent.

Sources said Posco would be an unlikely seller of its stake after chief executive Oh Joon-Kwon last month praised Roy Hill as a key asset for the Korean company.

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Iron Ore Rebound Seen by Morgan Stanley as Vale Sees $100 – by Jake Lloyd-Smith (Bloomberg News – September 15, 2014)

http://www.bloomberg.com/

Iron ore is heading for an end-of-year rally as some high-cost supplies are closed and steel demand picks up, according to Morgan Stanley, which said prices may first extend losses by a few more dollars before rebounding.

The steel-making raw material will drop into the $70s-a-ton range in the near term, then rally toward $90 a ton by the end of the year, analyst Joel Crane said in a report today. The commodity, which slumped to the lowest level in five years this month, last traded at less than $80 a ton in September 2009.

Iron ore fell into a bear market this year as the biggest producers including Rio Tinto Group expanded low-cost output, betting higher volumes would more than offset falling prices while less-competitive mines were forced to close. Morgan Stanley’s forecast for a rally in the final quarter follows a similar prediction last week from Vale SA, the world’s largest supplier, which said prices may be poised for a rebound.

“We are of the firm belief that an adequate proportion of supply from the top end of the cost curve will come out, flatten the curve and ultimately secure levels of cost support,” Crane wrote, referring to the potential loss of output from some of the highest-cost producers. The price should head back toward $90 a ton by year-end, said Crane.

Ore with 62 percent content at the Chinese port of Qingdao fell 36 percent to $85.58 a dry ton this year, according to data from Metal Bulletin Ltd. The commodity is heading for a third quarterly loss in the longest run of declines since 2009 amid forecasts for a surging global surplus.

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A giant of the past [U.S. Steel] resurrected as newest Wall Street hot stock – by Tim Shufelt (Globe and Mail – September 15, 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.

After years of despair that left shareholders reeling, United States Steel Corp. is regaining at least some of its former might.

Once a pillar of the American economy, the company’s long-slumping stock has been one of the hottest large caps over the past three months. That could be just the beginning of a return to form for a stock riding an organizational and industry transformation.

“The potential for transformational change at U.S. Steel is one of the most intriguing stories in the U.S. steel sector at the moment,” Credit Suisse analyst Nathan Littlewood said in a recent note. “The company’s raw material cost advantages as well as privileged steel price environment should position U.S. Steel as one of the most profitable steel makers in the world.”

A century ago, U.S. Steel was known on Wall Street simply as “The Corporation” by virtue of its size alone. More recently, the company benefited from the demand for resources fuelled by China’s rise. The vast quantities of steel required for the building of cities and infrastructure kept prices high through the early 2000s.

The financial crisis snuffed out the global growth needed for a buoyant steel market. And with China consuming half of the world’s steel, a slowdown in Chinese growth over the past couple of years has extended price weakness.

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Cliffs Director Quits Citing ‘Bullying’ at Board Meeting – by Sonja Elmquist (Bloomberg News – September 10, 2014)

http://www.bloomberg.com/

A director resigned from Cliffs Natural Resources Inc. (CLF), the U.S. iron ore producer that’s trying to sell its foreign mines, saying management won’t listen to dissenting views.

In his Sept. 4 resignation letter, which was published in a filing late yesterday, Richard K. Riederer said resolutions were presented for approval at a board meeting the week before without input from directors.

“There was an unwillingness to discuss options and bullying of directors who considered other options,” he said in the letter to Chairman and Chief Executive Officer Lourenco Goncalves. “I have a fundamental disagreement with your approach to corporate governance.”

Riederer, who had been a director for 12 years, is the second person to quit the board since its overhaul in July, when a slate of nominees from activist investor Casablanca Capital LP was elected following a six-month proxy contest. Timothy Sullivan resigned Aug. 11, saying Goncalves and newly elected directors rejected “anything that might be contrary to your per-scripted plan.”

Casablanca, which holds a 5.2 percent stake in Cliffs, has urged the Cleveland-based company to raise its dividend and sell assets outside the U.S. It backed Goncalves’ appointment as CEO last month. The company is looking to sell iron ore mines in Canada and Australia amid a slump in the price of the commodity.

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Goldman Calls End to Iron Age After ‘Dramatic’ Drop in Ore Price – by Jasmine Ng (September 10, 2014)

http://www.bloomberg.com/

Iron ore declined sooner than expected this year as supplies exceeded demand and prices are unlikely to recover, according to Goldman Sachs Group Inc., which said 2014 will mark the end of a so-called iron age.

This year “is the inflection point where new production capacity finally catches up with demand growth, and profit margins begin their reversion to the historical mean,” analysts Christian Lelong and Amber Cai wrote in a report today titled: “The end of the Iron Age.” The 2016 forecast for seaborne ore was cut to $79 a metric ton from $82 and the 2017 outlook was reduced to $78 from $85, according to the New-York based bank, which stuck with a forecast for $80 next year.

The raw material tumbled into a bear market this year as the biggest producers including Rio Tinto (RIO) Group expanded low-cost output, betting higher volumes would more than offset falling prices while less competitive mines were forced to close. The decline in prices came sooner than expected, according to Goldman, which said in November that iron ore would probably drop at least 15 percent this year. The commodity is seen in a structural downtrend, JPMorgan Chase & Co. said today.

“The price decline has been dramatic, but a weak demand outlook in China and the structural nature of the surplus make a recovery unlikely,” Lelong and Cai wrote. “Lower prices for iron ore and steel are unlikely to boost demand in a material way. Instead, the day when steel production in China will peak gets ever closer.”

Ore with 62 percent content at the Chinese port of Qingdao fell 39 percent to $82.22 a dry ton this year, the lowest level since September 2009, according to data from Metal Bulletin Ltd.

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Odisha [India] to ensure long-term [chrome, iron] ore supply to industries (Times of India – September 9, 2014)

http://timesofindia.indiatimes.com/defaultinterstitial_int.cms

BHUBANESWAR: The Odisha government on Monday decided to put in place a long-term raw material linkage policy to supply iron ore and chrome ore to industries that have signed MoUs with it.

The decision, taken at a meeting of the state cabinet headed by chief minister Naveen Patnaik, aims at encouraging establishment of mineral-based industries in the state, official sources said.

It follows repeated demands from different industrial houses for assured raw material supply. “The Odisha Mining Corporation will enter into five-year contracts with industries having MoUs with the state government,” chief secretary Gokul Chandra Pati said, briefing mediapersons.

The state-owned corporation will provide half of its production or iron ore to such industries while it would sell the rest in the open market. “The industries will get assured supply, but will have to pay the market price,” the chief secretary noted.

Official sources said the OMC will have a sales agreement with such industries akin to central PSUs National Mineral Development Corporation and Mahanadi Coalfields Limited. “We will consider supplying bauxite and manganese through similar arrangements in future,” a senior officer said.

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Iron ore market risks ‘disaster’ – by DOW JONES NEWSWIRES WITH A STAFF REPORTER (The Australian – September 8, 2014)

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

Mining companies will aggressively pursue increased output in the face of continuing weakness in the iron ore price, though with forecast demand not expected to keep pace with production, one analyst is warnings of a potential “disaster”.

Rio Tinto and BHP Billiton in Australia, and Vale in South America — the world’s top three iron ore miners — are ramping up production in a bet that their enormous efficiencies of scale will allow them to profit, even though prices are now less than half what they were four years ago. The companies are also betting that the lower prices could force higher-cost competitors out of the market, giving them more pricing power in the long run.

The iron ore price has been in a slump for most of the year, with its latest fall on Friday seeing a new five-year low at $US83.60 a tonne.

Already Cliffs Natural Resources has hired bankers to sell its mines in Australia because it has difficulty competing with the major players. “The big three are in control, and there’s not much you can do about it,” Lourenco Goncalves, chief executive of the Cleveland-based company, said in an interview.

The developments are being closely watched by steelmakers in China, South Korea and Japan, the world’s top three importers of iron ore, the key ingredient in making steel. Should the big players, which account for more than 60 per cent of all seaborne trade of the mineral, tighten their control of the market, they could exert greater pressure during price negotiations.

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