12 / 12 / 09 We can't afford to ignore our coal resources AS world leaders gather in Copenhagen for the climate change summit, the UK delegation sho..
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22 / 06 / 09 Anglo stresses early-stage nature of Xstrata 'proposal' The board of diversified mining group Anglo American confirmed on Sunday that it had indee..
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14 / 04 / 09 China economy shows signs of recovery China's economy is showing signs of a nascent recovery, but even officials who want to boo..
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02 / 01 / 09 China turns screws on iron ore giants JUST days into the new year the signs from China for our battered big miners are ominous.
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16 / 10 / 09 in
Coal port problems still causing delays
THE nation's biggest coking coal port, Queensland's Dalrymple Bay, is shipping at just 70 per cent capacity, resulting in huge queues of ships.
Macarthur Coal chief executive Nicole Hollows said yesterday that the Dalrymple Bay Coal Terminal was currently shipping at a rate of just 60 million tonnes a year, despite an expansion of the port's capacity to 85 million tonnes at the end of the last financial year three months ago.
Ms Hollows said the bottlenecks were mainly in the rail system.
She confirmed that even though port capacity had been expanded, the ship queues at Dalrymple Bay remained at pre-global financial crisis levels of more than 60, and that Macarthur Coal was waiting 25 days for a ship to be loaded.
The delay means miners pay shippers an extra $4 to $5 a tonne, or up to $925,000 for a ship carrying 185,000 tonnes of coal.
The Australian revealed earlier this month that the waiting time off Dalrymple was costing coal companies more than $500 million a year.
"People are ordering vessels at what the port capacity is, 85million tonnes, thinking the capacity will be there, but it is not," Ms Hollows said in Melbourne yesterday.
"It is a big issue. It does concern me that we are still only achieving 60 to 70 million tonnes now."
In July, a record 6 million tonnes of coal was shipped through the port, representing capacity of 72 million tonnes, but this had dropped back to a 60million tonne rate, Ms Hollows said.
As well as being hit by demurrage (the charge for use of a ship longer than the time agreed upon), producers were paying for their full capacity at Dalrymple Bay, she said.
Macarthur produces pulverised coal for injection into steel mill blast furnaces.
Ms Hollows said a recent surge in Chinese imports that had saved the Australian coking coal industry from another round of production cuts was probably unsustainable, but that demand would remain at high enough levels to influence seaborne markets.
"I think China is in a restocking phase," she said.
"In June they were importing between 4 and 6 million tonnes, up from about 500,000 tonnes to 1 million (a month); they'll probably go back to a couple of million tonnes."
Future coking coal demand growth would probably come from Brazil and India, and to a lesser extent China, which had the ability to ramp up its own coking coal production, she said.
Ms Hollows said that uncertainty over the Rudd government's proposed emissions trading scheme, the Queensland government's recent increase in coal royalties, and infrastructure issues, had been raised as concerns on a recent overseas roadshow.
"In New York, they say: 'Why should I invest in you? Your government's putting in a CPRS (carbon pollution reduction scheme) that they don't even know what the cost is going to be, or when, or how it's going to come into play. And other countries aren't going to have it. You can't even get over your infrastructure issues and your government changes your royalty rates'."
06 / 10 / 09 in
Fortescue, Seeking Funds From China, Keeps Dropping
Fortescue Metals Group Ltd., Australia's third-biggest iron ore exporter, fell for a 10th day in Sydney, its longest losing streak, on concern it may fail to get $6 billion in funds from Chinese lenders for expansion.
Perth-based Fortescue dropped 5.3 percent to A$3.40 at the 4:10 p.m. local time close, taking its decline for the past 10 trading days to 19 percent. The losing streak is the longest since it began trading in 1987 when it was known as Pharoah Metals Corp.
Fortescue last week missed a self-imposed deadline to secure funding as part of an iron ore price agreement with the China Iron & Steel Association and Baosteel Group Corp. The miner, controlled by billionaire Andrew Forrest, needs the capital for a plan to more than double exports by 2012.
“The market is yet to be convinced that a funding deal can be struck, and every day that passes raises concerns of a possible equity raising,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “There are ongoing concerns about the company’s funding model and the shares seem stretched to many people.”
Fortescue spokesman Cameron Morse wasn’t immediately available to comment.
Fortescue held talks with major Chinese financiers, Forrest said last month, without naming them. Fortescue said securing financing is a condition of its agreement to cut contract iron ore prices for Chinese mills by 35 percent.
The price agreement should be honoured whether Fortescue secures financing, said Shan Shanghua, general secretary of the Chinese steel association, Caijing magazine reported Sept. 30.
29 / 09 / 09 in
Anglo American sees short term ease in China growth
Commodities growth in China may ease over the short-term, though longer term the country's fundamentals were sound, the head of miner Anglo American has said.
The easing may occur despite near-record imports of copper and coking coal in recent months as China's fiscal stimulus begins to counter the downturn in exports, Anglo American chief executive Cynthia Carroll said in a speech in Brisbane.
She also said difficult financing conditions felt by the mining sector were expected to continue.
This would "impact the funding and timing of many potential mines and expansions, constraining supply as economic growth returns," Ms Carroll said.
Recovering prices for industrial staples such as copper, nickel and metallurgical coal indicate that outlook for Anglo's markets had improved faster than most observers expected, Ms Carroll said.
"But there are still some question marks over the sustainability of the recovery," she said.
"Continued deleveraging by households, companies and banks and the shadow of rising unemployment and large budget deficits in the major western economies are still a great concern."
However, stimulus spending outside of China would be particularly positive for platinum group metals and diamonds, she said.
Coal production to double
The mining group also said it could double its production of coal used for steel making by 2018 if all of its unapproved projects went ahead.
The future growth in metallurgical coal is focused around its existing properties in Queensland, Ian Cockerill, chief executive of Anglo's coal unit, told a mining conference hosted by investment bank Credit Suisse .
Anglo's seaborne metallurgical coal output was 15 million tonnes last year and a presentation on Anglo's website showed potential output rising to over 30 million tonnes by 2018.
Anglo is the world's fourth-largest producer of both met coal and thermal coal used in power plants.
The world economic downturn has had a limited impact on coal-fired power generation and in 2009 China is expected to become a net importer of thermal coal, Anglo said.
Anglo - the world's fourth-biggest diversified mining group by market value - also has a pipeline of projects in thermal coal, which could lead to a six per cent rate of compounded annual growth until 2018, the presentation said.
A graph showed Anglo's potential attributable output in seaborne thermal coal growing to over 50 million tonnes by 2018 from 36 million in 2008.
Most of Anglo's thermal coal output is from South Africa but it also has operations in Colombia and Australia.
Jobs at risk
Ms Carroll also said that if the ETS was passed by the government in its current form, more than 2000 coal mine workers would be axed and two Anglo American mines would be closed.
'"In Anglo American alone we risk premature closure by 10 years of two major mines and job losses of more than 2000 people," she said.
Not to mention royalties of over $1 billion lost to the Government."
16 / 09 / 09 in
Some China Iron Ore Talks Continue - BHP
BHP Billiton has yet to fully sign off on this year's long term iron ore price contracts with Chinese steel mills as it prepares to start next year's negotiations, its head of marketing said on Wednesday.
"We're still negotiating with China," Tom Schutte, president, marketing for BHP, the world's largest diversified miner and No. 3 iron ore miner told reporters at a briefing.
Negotiations for pricing in the 2009/10 shipping year will come about in the next month, he said.
This year's iron ore talks between miners including BHP and Chinese customers have been particularly fraught as China's top negotiator held out for deeper cuts than those secured by other Asian mills, even as spot prices soared.
Spot ore to China peaked at $115 (70 pounds) a tonne in August, but have since slid back to $82-$84 this week, which is still a premium of around 14 percent to the benchmark.
Schutte said the global financial crisis, which had caused volatility across a range of commodities, had persuaded more of BHP's customers to move to short-term pricing arrangements, though some still stuck to the decades-old annual benchmarking system.
BHP has made no secret of its desire to stop selling iron ore and other commodities at one price for a 12-month period, in favour of what it calls more transparent arrangements such as index pricing.
"I'd love if they all would come over that would make it that much easier," he said.
Schutte said that besides iron ore, BHP had made headway in coking coal, where some of contracts for the year had been renegotiated from annual to quarterly pricing regimes.
The switch to quarterly pricing comes as Australia miners, including BHP, step up coking coal exports to China, he said.
This year total Australian exports to China will balloon to 30 million tonnes from just 1 million tones in 2008, largely at the expense of Chinese domestic production, which was falling, he said.
Shutte also said total copper concentrate exports to China will rise 13 percent in 2009, citing rising consumption and lower domestic production.
Schutte did not give tonnage figures. Industry data shows China's 2008 copper concentrate imports were 5.2 million tonnes, which was a 14.75 percent rise over 2007.
08 / 09 / 09 in
Iron ore prices cloud real issues
WELL that, it appears, is that, after Rio Tinto stated the bleeding obvious last Friday -- that it would not continue talks with China over iron ore prices.
It came only weeks after the world's biggest iron ore producer, Brazil's Vale, said it had pulled out of talks and would strike prices with individual mills.
This is something BHP has been doing, too. All three have also been taking advantage of spot prices, which have been on the way down because of China's growing steel glut, though still well above last year's record contract prices that caused the global steel sector to choke in its own molten metal.
Rio's silence on the issue until now has been understandable as its priority has been to protect its employees. Now it obviously feels the wheels have picked up so much speed there is little it can do but sit back and watch. In reality there has barely been a word spoken between the two sides for many months -- a breakdown that occurred before the arrest of Stern Hu and his colleagues.
The iron ore negotiations are a real conundrum, as next year's talks are soon to begin, yet this year's have not been resolved.
So as they say in Mandarin, zai jian -- goodbye, or more literally, next time. What next time will look like with no price set this year is the great unknown -- and if a face-saving number is plucked from the air, it will mean nothing. What we do know is that there will be no real base prices. There has also been an admission by the Chinese by way of the six-month price deal struck with Fortescue last month that yearly single price contracts are dead.
The China Iron and Steel Association has made a spectacular contribution to the mess China finds itself in, after it seized control of the negotiations from the biggest steelmaker Baosteel.
This annoyed Baosteel and the other top 70 state-owned mills CISA represents. It also put a bunch of bureaucrats in charge of a commercial process -- something even the Chinese usually try to avoid. CISA represents only about 50 per cent of steel production in China, at best, so small mills went and did their own thing. CISA also had the hypocrisy to accuse the big miners of price setting and control even as it promoted itself as a cartel keen to squeeze out a better price.
It then compounded all of this by rejecting the price cut of 33 per cent of the best "fine" iron ore and pushing for 40 per cent or more, while spot price continued to soar. It claimed prices were making mills unprofitable then, lo and behold, by June they were making profits.
But for all the dramas, iron ore prices are simply the noise and fury that cloud the real issue -- China's intractable problem with its steel sector. It is an issue that is as much geographic and technological as it is structural. The iron ore talks appear to have distracted CISA from its main job, which is to force government-edicted change through the sector.
And the more it forces that change through, the more China will rely on quality iron ore produced by the big three miners.
"Using foreign technology and know-how helped China leapfrog competitors such as South Korea, putting Chinese steelmakers on the same level as those in Germany and Japan," Michael Komesaroff explained in the latest edition of the China Economic Quarterly.
"But these technical advances also increased the country's dependence on higher quality imported iron ore, which modern steel mills need to operate at full efficiency. Imported ore produces a stronger feed that improves blast furnace productivity, more than offsetting its expense."
China wants to consolidate and shut down many hundreds of small backyard mills that over-pollute. But such mills can often produce basic steel products -- the countless rods and sheets used to build the infrastructure being funding by the 4 trillion Yuan-plus ($686 billion) government stimulus package -- better than the more technologically advanced products.
So, as orders for advanced steel products for planes and ships from the more sophisticated mills dried up because of the global recession, the government has inadvertently contributed to its own problem.
"These leaps in productivity bring big environmental benefits -- especially in reduced emissions of greenhouse gases and less wasteful use of water, a precious commodity in much of China," Komesaroff wrote.
01 / 09 / 09 in
Lower China sales may hurt iron ore exports
China's stockpiles of iron ore to make steel are at 75 million tonnes (mt), just 0.6% below levels in September, when they rose to the highest since at least 2006.
Mumbai: The country’s iron ore exports this month may decline 5-10% as China cuts purchases, a minerals industry group said.
Enquiries from buyers of the main raw material used to make steel have dried up in the last 15 days, Federation of Indian Mineral Industries secretary general R.K. Sharma said on Monday in a telephone interview from New Delhi. Exports rose last month, compared with the same period a year earlier, he said.
China’s stockpiles of iron ore to make steel are at 75 million tonnes (mt), just 0.6% below levels in September, when they rose to the highest since at least 2006.
India’s iron ore exports were at 105 mt in the year ended 31 March, compared with 104 mt a year earlier, according to data from the mining ministry.
19 / 08 / 09 in
China recent actions a real concern
The most frequent response to the arrest of four Rio Tinto executives last month on charges, initially, of espionage, has been “What on earth are the Chinese up to?”
The Rio employees, who were responsible for negotiating iron-ore prices with China’s state-owned steel mills, were formally arrested yesterday and accused of receiving bribes and obtaining business secrets. This was a step down from the diplomatically loaded original charge of stealing state secrets. But the affair remains a very serious concern both for Rio and the wider business world.
The reason for the anxiety is that nobody is quite sure what motivated the arrests, although there are a number of theories:
1. Those arrested really have been up to no good, which Rio denies.
2. China is retaliating against Rio for its decision to walk away from a $19.5 billion (£11.8 billion) investment by Chinalco, the Chinese state-owned metals group. This would have been China’s largest foreign investment and its failure has caused a loss of face for those involved.
3. The negotiations between Rio and China on iron-ore prices this year have not been going well. China has demanded price cuts of 50 per cent, but Rio, and the other miners, have settled on a 33 per cent discount for other buyers. Were the arrests an attempt to unsettle Rio and gain the upper hand in the negotiations?
4. Could this simply be a lost-in-translation moment over what constitutes “secret” market data. China publishes little information about anything, so sometimes companies are forced to engage directly with officials to gain basic facts — a system ripe for abuse. But does gaining information from, say, a state-owned steel mill turn that information into a state secret? If this is the case, any company looking for market data in China could be in jeopardy.
All of the potential explanations are worrying. The best case is that one of London’s most respected companies has rogue employees engaged in bribery and theft. The worst case is that China’s Government is so vindictive that it is willing to shatter lives and harm its own economy to score points in a deal or negotiation.
Which explanation turns out to true will significantly affect how Western companies approach relations with the world’s fastest-growing economy.
12 / 08 / 09 in
Shanghai copper edges down as China data disappoints
Shanghai copper fell 0.8 percent on Wednesday, after China released weaker-than-expected factory output and investment data for July, cooling market sentiment.
FUNDAMENTALS
* Shanghai's benchmark third-month copper futures SCFc3 edged down 0.8 percent to 48,230 yuan a tonne by 0101 GMT.
* The most-active Shanghai copper contract for November delivery SCFX9 fell nearly 1 percent, to 48,000 yuan a tonne.
* Copper for three-month delivery on the London Metal Exchange MCU3 gained $45 to $6,075 a tonne, reversing some of its losses in the previous session.
* China's copper imports in July fell 14.6 percent from the June record, but imports of scrap surged and domestic production of refined copper continued to climb, showing strong demand for the industrial metal. [ID:nHKG338126]
* Notwithstanding China's appetite for copper, the economy seemed to take a breather as July's factory output and investment disappointed, although the world's third-largest economy remains on course to recovery. [ID:nLB633470]
* The U.S. Federal Reserve began a two-day meeting on Tuesday that is expected to leave benchmark interest rates near zero and let a program to buy Treasury securities expire as economic gloom begins to lift. [ID:nN11538767]
* Copper stocks in warehouses registered with the LME edged down 100 tonnes to 291,175 tonnes on Tuesday.
* On the supply side, Chile's Escondida, the world's biggest copper miner, said it had restarted operations of its SAG mill, after the mill's closure hurt output in the first quarter.
29 / 07 / 09 in
China soaks up coking coal exports
CHINA doubled its imports of Australian coking coal in June, helping to reopen at least one Queensland mine made idle because of the economic crisis.
Australian miners of coking coal have been saved from more production cuts as China shut many of its mines for safety and cost reasons and switched from being a net exporter to a net importer of the steelmaking ingredient.
China imported 3.15 million tonnes of Australian coking coal in June, up from 1.3 million tonnes in May, according to Chinese customs data released this week.
In December, China took just 132,421 tonnes of Australian coking coal.
China's emergence as a major importer of coking coal was almost totally unexpected by the industry, which had been preparing for a dire first half as traditional buyers in Japan and Korea shut down production.
Coal marketing sources said it was not yet clear if Chinese demand was sustainable.
It is unclear whether the closed coalmines, particularly those shut for poor safety records, will come back into production, and whether higher prices will be needed to achieve that.
"Demand seems to be holding up quite well for a few months out, which is as far as we can tell at the moment," a source at one local coalminer said.
"We've certainly been surprised at the demand coming out of China."
There are also signs Japan and Korea are returning to the market, but one source said miners were tempering their excitment.
"It looks pretty good, but we've just gone from six months ago, when the world was going to end, to a position where we've sold much more coal than we would have dreamed possible. When you've gone through that experience, you're still a bit cautious," he said.
Xstrata is planning to restart its Oaky 1 underground longwall mine in Queensland after locking in spot contracts with Chinese buyers until the end of the year.
The mine, which did not previously sell coal to China, was made idle in December.
A spokesman said the restart was viewed as temporary because it was unclear whether demand would hold up.
BHP, by far the world's biggest coking coal exporter, this week surprised the market by beating previous June quarter guidance based on improving Asian demand. It had told the market to expect full-year production to be down 10-15 per cent on capacity.
Last month, Macarthur Coal said it had shipped both thermal and pulverised injection coal for blast furnaces into China for the first time. It is thought to have sold a substantial amount of production into that market.
China's total June coal imports were a record 16.1 million tonnes, which was 70 per cent higher than the previous record of 9.43million tonnes set in May.
Total Australian coal imports into China in June were 7.47million tonnes, more than doubling May's 3.65 million.
20 / 07 / 09 in
China reviews iron ore import licences - sources
China is reviewing iron ore import licences held by steel mills and trading companies, and may cancel 20 licences, most of which are held by trading houses, three industry sources said on Tuesday.
The China Iron and Steel Association and the Ministry of Commerce were investigating whether importers were making speculative purchases, said the sources, who are familiar with the situation.
"Big and state-owned trading houses should be fine, but some private-sector (trading) companies could face some trouble," said a source, on condition of anonymity due to the sensitivity of the issue.
Currently, 112 steelmakers and trading houses are licensed to import iron ore in China.
Iron ore trading has been a sentitive topic in China since annual price talks with international suppliers blew up into a spying row after China detained four executives of London-listed miner Rio Tinto (RIO.L), including one Australian, and accused them of stealing state secrets.
For more reports on the detention of Rio Tinto executives being, please click [ID:nSP473911].
The 21st Century Business Herald, a widely-read Chinese newspaper, quoted Shan Shanghua, general secretary of the China Iron and Steel Association, as saying the association was "currently continuing to restore order in iron ore trading".
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