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Iron Ore

COLUMN-Everybody but the curve thinks iron ore is going down – by Clyde Russell (Reuters India – April 22, 2014)

http://in.reuters.com/

The opinions expressed here are those of the author, a columnist for Reuters.

(Reuters) – It’s hard to find any bullish predictions for iron ore prices, with the consensus being that it will drop to below $100 a tonne. Except this isn’t reflected in the financial markets.

The latest bearish signal for iron ore is the decision by an Indian court to allow the mining of 20 million tonnes per annum in the state of Goa, most of which will end up on the export markets.

While this isn’t enough ore to cause prices to slump, it adds to the overall growth in supply, which is widely expected to overwhelm growth in demand, especially as top buyer China’s economy loses some momentum. But despite the bearish outlook, the actual pricing for iron ore, both in the spot and futures markets, is holding up well.

Asian spot prices .IO62-CNI=SI were $113.30 a tonne on Monday, down 15.6 percent so far this year. But they are up 8.2 percent from the year low of $104.70 on March 10 and 31 percent above the 2012 low of $86.70, which was the weakest price for three years.

But more importantly than the spot market, the main paper markets are also showing pricing resilience. The curve for Singapore iron ore swaps <0#SGXIOS:> has a good track record of pointing to turns in market pricing.

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UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)

http://in.reuters.com/

SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

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Vale Lands $2.8 Billion Brazil Funding for Iron Expansions (1) – by James Attwood (Bloomberg News – April 15, 2014)

http://www.bloomberg.com/

Vale SA (VALE5) secured 6.2 billion reais ($2.8 billion) of funding from Brazil’s state development bank for expansions at Carajas, the world’s largest iron-ore complex.

The BNDES loan will help finance Rio de Janeiro-based Vale’s railway network and a new mining and processing unit in Para state with annual capacity of 90 million metric tons, the bank said in a statement distributed by e-mail today.

Chief Executive Officer Murilo Ferreira is seeking to recover ground in the seaborne iron-ore market that it lost to Australian rivals BHP Billiton (BHP) Ltd. and Rio Tinto Group since 2007. Serra Sul, part of Carajas in northern Brazil, is the industry’s most expensive project ever at almost $20 billion.

The expansion and related distribution network will generate about 30,000 jobs at the peak of construction and is scheduled to start operating in 2016, BNDES said. It will be the first major iron-ore venture to fully replace in-mine trucks with conveyor belts, according to the miner.

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UPDATE 2-Bad weather cuts Rio Tinto’s iron ore shipments – by James Regan (Reuters India – April 15, 2014)

http://in.reuters.com/

SYDNEY, April 15 (Reuters) – Rio Tinto’s iron ore shipments fell 8 percent in the first-quarter from the previous quarter due to weather-related disruptions in Australia and Canada, but the miner said it was on track to meet its full-year target.

Production still jumped 16 percent on the same quarter a year ago as the world’s No. 2 iron ore producer behind Brazil’s Vale ramps up production at its Australian mines to meet growing demand from China.

“It appears they were hit a litle harder than we expected by the weather, though we don’t see any issues in meeting their full-year target,” said RBC Capital Markets analyst Chris Drew.

Iron ore has replaced other industrial and precious commodities such as coal, gold and silver as the mineral with the most profit potential, delivering bumper earnings for giant low-cost miners such as Rio and BHP Billiton.

Iron ore prices .IO62-CN=SOI have recovered 12 percent since a steep dip in March on weaker Chinese steel prices. At the current price of $117 a tonne, Rio Tinto enjoys a profit margin of over $60 a tonne.

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Glencore closer to iron ore ambition – by Katrina Manson and Javier Blas (Financial Times – March 30, 2014)

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

Glencore has cleared a key hurdle in its ambition to become an iron ore miner, reaching a preliminary deal with the west African country of Mauritania for a $1bn contract for access to railway and port facilities.

The commodities giant is keen to expand into iron ore, a key ingredient of steel and a vital source of profits from rivals Rio Tinto, BHP Billiton and Vale of Brazil. The trader is seeking to develop three big projects in Mauritania, two in partnership with state-controlled miner Société Nationale Industrielle et Minière, which has exclusively exported the mineral from the country since the 1960s.

The railway contract is one of the three key obstacles to build the remote Askaf mine. Although Mauritania, which relies on iron ore for half its exports and a quarter of its tiny $4bn economy, wants to boost iron ore production, the two parties have spent two years negotiating access to railway.

Initially, SNIM asked Glencore far too high a price for access to its railway for the next 20-25 years, according to people familiar with the negotiations. But recently both sides reached a preliminary deal, pending some final discussions.

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The Fight for Wisconsin’s Soul [iron ore mining] – by Dan Kaufman (New York Times – March 29, 2014)

http://www.nytimes.com/

WISCONSIN has been an environmental leader since 1910, when the state’s voters approved a constitutional amendment promoting forest and water conservation. Decades later, pioneering local environmentalists like Aldo Leopold and Senator Gaylord Nelson, who founded Earth Day in 1970, helped forge the nation’s ecological conscience.

But now, after the recent passage of a bill that would allow for the construction of what could be the world’s largest open-pit iron ore mine, Wisconsin’s admirable history of environmental stewardship is under attack.

The mine, to be built by Gogebic Taconite (GTac), owned by the coal magnate Chris Cline, would be in the Penokee Hills, in the state’s far north — part of a vast, water-rich ecosystem that President John F. Kennedy described in 1963, in a speech he delivered in the area, as “a central and significant portion of the freshwater assets of this country.”

The $1.5 billion mine would initially be close to four miles long, up to a half-mile wide and nearly 1,000 feet deep, but it could be extended as long as 21 miles. In its footprint lie the headwaters of the Bad River, which flows into Lake Superior, the largest freshwater lake in the world and by far the cleanest of the Great Lakes. Six miles downstream from the site is the reservation of the Bad River Band of Lake Superior Chippewa, whose livelihood is threatened by the mine.

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Raoghat mines in Bastar: Iron in their souls – by Paramita Ghosh (Hindustan Times – March 29, 2014)

http://www.hindustantimes.com/

Hills can be unkind, if you are climbing them, or even if you are trying to save them. They have no properly marked-out roads, the clock here is meaningless, but there is shade, and the trees here are everything. The trees point to the sky like compasses; they pelt down flowers, sour-sweet fruits; their leaves are eaten by cows and men; they house the gods, and gods here are like relatives – so why can’t the people keep them?

The nearby Bhilai Steel Plant (BSP) iron-ore mine had led to massive deforestation in Dalli-Rajhara, destroyed fields of grain and corn, led to land seizure, so would its mine at Raoghat be any different? For over 10 years, Badri Gawde, 38, a social worker from Antagarh, a tribal-dominated no-frills town, 20 km from the Raoghat hills and 80 from Kanker city, had been asking himself this question. Lately, he had begun to ask it a little more insistently, holding public meetings, facilitating study trips for academics, tying-up with Chhattisgarh’s unruly bunch, the mine workers, and the state’s two-bit village officials, the sarpanches, and thinking himself up into a leader. Why not say he was a Maoist? And they did.

Gawde’s political pedigree is mixed. Ever since January 24, 2014, when he was picked up at Antagarh, and held in Raipur’s Central Jail under the draconian Public Security Act, he has become, like Lalgarh’s Chhattradhar Mahato, nobody’s man. Naresh Thakur, a Kanker Congress leader, admits Gawde was “with the party”, the state Congress chief, Bhupesh Baghel, said he was a BJP man.

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It Is Staggering How Much Australia’s Mining Boom Has Changed Perth And Its People – by Chris Pash (Business Insider Australia March 28, 2014)

http://www.businessinsider.com/

Imagine this horror: your child has just reached dating age, and their first crush is on the son or daughter of someone you went out with in your youth, a relationship that ended disastrously.

It was once a common story in Perth, Western Australia, but less so now as the state continues to grow faster than any other in Australia, in both population and its economy.

That comfortable big-country-town feeling is fading, as fast as the red dust of the North West is being shifted to get at the valuable minerals beneath it.

The mining boom of the last decade has done many things for the state and for Australia, most notably being the economic factor that stopped Australia dipping into negative economic growth during the Global Financial Crisis. China is the biggest recipient of Australia’s exports. About half those exports are iron ore from Western Australia. Ten years ago, it was only 16%.

Back in the 1970s, about 1 million tonnes of iron ore was being shoveled from the ground each week. Now it’s about 1.5 million tonnes a day. Visitors from the east say the same things. “Great place, beautiful beaches, bloody expensive. You won’t believe what I paid for bacon and eggs. And the coffee at $5 is rubbish.”

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Cliffs Natural Resources Booted From S&P 500, To Be Replaced By Essex Property Trust – by Maggie McGrath (Forbes Magazine – March 26, 2014)

http://www.forbes.com/

Cliffs Natural Resources CLF +1.25% has had a rough go of it recently: after posting a 32.5% loss in 2013, the struggling iron ore producer has continued to take a beating in 2014 trading. And now, its near-24% year-to-date decline has not only secured its title as one of the worst performing S&P 500 stocks over the past 12 months, but it has also gotten Cliffs booted out of the S&P 500 and into the S&P midcap 400.

The S&P Dow Jones Indices announced Wednesday evening that effective April 1, Cliffs will no longer be a member of the S&P 500. In its place will be Essex Property Trust, a REIT that is currently a member of the S&P midcap 400. In addition to moving up to the S&P 500, Essex will also acquire BRE Properties in a deal that is expected to be completed after the markets close on April 1.

As BRE currently resides on the S&P 400, its departure leaves room on the midcap index for the Fei FEIC +3.63% Company, an Oregon-based supplier of scientific instruments that is currently listed on the S&P Smallcap 600.

“Cliffs Natural Resources and FEI have market capitalizations that are more representative of the mid-cap market space,” the S&P Dow Jones Indices said, explaining the switch.

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UPDATE 1-India’s Goa should cap iron ore output at 20 mln T/yr -court panel – by Krishna N Das (Reuters India – March 26, 2014)

http://in.reuters.com/

NEW DELHI, March 26 (Reuters) – Iron ore production in Goa, usually India’s top exporting state of the raw ingredient for steel, should be capped at 20 million tonnes a year when an 18-month old mining ban is lifted, a court-appointed panel said, less than half peak output and curbing potential shipments to key buyer China.

But even with that limit, additional supply from Goa could further pressure iron ore prices in a global market expected to be in surplus this year as top miners boost output and Chinese demand slows.

India’s Supreme Court is likely to implement the recommendation from the panel, which it appointed in November to look at lifting the ban that was imposed to curb illegal mining. The court earlier allowed the sale of about 15 million tonnes of iron ore that had sat in a stockpile.

The panel also said in a report seen by Reuters that Goa should consider setting up a state iron ore mining company to minimise environmental damage by private miners. While analysts expect a gradual recovery in Indian iron ore exports over the next two years, the pace is likely to be modest and far from a record high of more than 117 million tonnes set in the fiscal year through March 2010.

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UPDATE 3-Australia’s Rinehart seals funding for $10 bln iron ore project – by Sonali Paul (Reuters India – March 21, 2014)

http://in.reuters.com/

MELBOURNE, March 21 (Reuters) – Australian billionaire Gina Rinehart has secured $7.2 billion in debt for her Roy Hill iron ore mining project, completing all the funding for a giant mine in Western Australia due to start exporting in late 2015.

The 55-million-tonnes a year mine will make Roy Hill Australia’s fourth largest iron ore producer, adding to a looming supply glut built up by bigger rivals Rio Tinto , BHP Billiton and Fortescue Metals Group. “We look forward to becoming a major iron ore producer on an international scale,” Rinehart, chairman of Roy Hill and Asia’s richest woman, said in a statement.

The $10 billion project is already 30 percent built, the company said, including dredging for two deepwater port berths, an airport with a runway big enough for a Boeing 737 plane and villages to house 3,600 construction workers and 2,000 operational staff on site and at Port Hedland.

The debt financing, the biggest ever provided for a mining project, is made up of loans and guarantees from five Export Credit Agencies from Japan, South Korea and the United States and 19 commercial banks from Australia, Japan, Europe, China, Korea and Singapore.

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China doomsayers misguided and will be proven wrong – Vale CEO – by Juan Pablo Spinetto & David Biller (Mineweb.com/Bloomberg – March 20, 2014)

http://www.mineweb.com/

Vale CEO, Murilo Ferreira, says investors betting against China and its demand for iron ore from the company will be proven wrong.

Investors betting against China and the nation’s demand for iron-ore from top producer Vale SA will be proven wrong, Chief Executive Officer Murilo Ferreira said.

“The biggest enemy to our share price is a certain belief that China will be over,” Ferreira said during a presentation in Sao Paulo today. “They are once more betting against China as they did in 2004, 2005, 2006 and beyond and I think that people are going to fail again with their projections.”

Shares of Vale, which ships about half its iron ore and pellets to China, dropped to a five-year low earlier this month on concern a possible economic slowdown in the biggest buyer of the mineral will hurt sales. Iron-ore entered a bear market on March 7, losing 23 percent from a five-month high in August through today, as Australian miners including Rio Tinto Group boost supply and China tightens monetary conditions.

The world’s third-largest mining company has underperformed its main peers in the stock market for the past year as weakening demand growth in China and a multibillion-dollar tax dispute with Brazil weighed on investors’ confidence.

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Drug cartel a misnomer as Mexico criminal group earns more from mining, logging, extortion – by E. Eduardo Castillo (Associated Press/U.S. News and World Report – March 17, 2014)

 http://www.usnews.com/

LAZARO CARDENAS, Mexico (AP) — Forget crystal meth. The pseudo-religious Knights Templar drug cartel in western Mexico has diversified to the point that drug trafficking doesn’t even rank among its top sources of income.

The cartel counts illegal mining, logging and extortion as its biggest moneymakers, said Alfredo Castillo, the Mexican government’s special envoy sent to restore the rule of law in Michoacan, the state controlled by the Knights Templar the last several years.

Iron ore “is their principle source of income,” Castillo told The Associated Press. “They’re charging $15 (a metric ton) for the process, from extraction to transport, processing, storage, permits and finally export.” The ore itself doesn’t go for that price; the cartel skims $15 for every ton arriving in port. While it’s long been known that Mexican cartels engage in other types of criminal activity, including trafficking of people and pirated goods, this is the government’s first official acknowledgement that a major organized crime group has moved beyond drugs. The Knights Templar and its predecessor, La Familia, started out as major producers and transporters of methamphetamine.

The implications are enormous that organized crime in general in Mexico stands to diversify and become even more entrenched.

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Why miners aren’t panicking about the latest commodity drop – Peter Koven (National Post – March 13, 2014)

The National Post is Canada’s second largest national paper.

While steep declines in copper, iron ore and coking coal prices have spooked investors, they are not severe enough to disrupt the mining sector at this stage.

The vast majority of projects can generate decent margins at these price levels, according to experts. Though in the case of coal, there has been enough of a drop to make high-cost producers nervous.

Prices for all three commodities have been under pressure throughout 2014, but they plummeted over the last several days due to economic concerns out of China. Manufacturing activity has been weaker than expected, and a bond default by a solar company raised fears of tighter credit conditions. That hit the copper market in particular, as many Chinese companies use the red metal as collateral to raise money.

Chinese steel mills are also being threatened as the government tightens environmental standards. That is putting pressure on coal and iron ore.

Copper has sunk to near a four-year-low, falling below the psychological barrier of US$3.00 a pound.

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BHP upbeat on iron ore growth – by Mitchell Neems (Business Spectator – March 11, 2014)

 http://www.businessspectator.com.au/

As the fall in the iron ore price continues to send shockwaves through global markets, mining giant BHP Billiton says its focus on productivity is starting to deliver value to its iron ore business and it expects demand for steel to grow over the next decade.

Speaking at the AJM Global Iron Ore and Steel Forecast conference in Perth, BHP’s iron ore president Jimmy Wilson said the group remains confident global demand for iron ore will continue to grow, though likely at a more moderate rate, driven by urbanisation and industrialisation.

“Our market outlook is for continued strong steel demand growth over the next 10 years,” he said. “Our view that Chinese crude steel production is expected to peak at 1.1 billion tonnes, around 2025, is unchanged.” Recent world iron ore growth had been driven by Australian production, he said.

Mr Wilson added that demand over the next 10 years would be maintained as 1.2 billion people globally moved to urban areas, including 240 million people in China.

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