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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01 / 07 / 09 in
Iron ore pricing system near collapse as talks go on
Rio Tinto Group, the world's second biggest iron-ore producer, said some contracts may revert to spot market pricing Wednesday July 1st as China's steelmakers argue for a deeper cut than Asian rivals agreed.
Talks with Chinese steelmakers are continuing, Gervase Greene, a Perth-based spokesman for Rio said by phone. Nippon Steel, JFE Holdings and Posco, Asia's three biggest steelmakers, agreed last month to a 33 per cent cut in the annual contract price for benchmark iron ore.
For about 40 years, iron-ore suppliers have held annual talks with steelmakers to fix prices for the next 12 months. The 2008 round splintered, and this year China's steel association says Rio's price agreement isn't a benchmark. This year would be the first in at least a decade that Rio hadn't agreed prices with most customers by June 30, when some contracts can revert to prices for immediate delivery, known as the spot market.
''Rio Tinto has long been a supporter of the benchmark system but if customers choose to buy on the spot market instead they will,'' Rio's Greene said by phone.
Abandoning annual pricing agreements may increase earnings volatility for London-based Rio, JPMorgan Chase & Co. said last month. Rio said June 1 that about half the ore it produced this year has been sold at spot prices.
China overtook Japan as the single biggest buyer of iron ore in 2003. Until then, benchmark prices had usually been set by Japanese or European steelmakers. China was the first nation to settle for the 2007 Japanese financial year, agreeing a 9.5 per cent increase in prices with Vale, the world's biggest iron ore exporter.
Rising prices
Spot prices for iron ore into China gained 20 per cent since Rio settled prices with Japanese steel mills on May 26, the first settlement of the year. Spot prices in China are currently similar to the annual contract price for the year to March 31 accepted by steel mills in Japan, Korea and Taiwan.
China has rejected the annual price accord and called for contract prices to drop as much as 45 per cent.
''We have a number of contracts that when they get to June 30 there is the potentiality for those agreements falling away and then moving to spot,'' Sam Walsh, chief executive officer of the London-based company's iron ore unit, said on May 26. ''I don't think that would be a good thing for either iron ore producers or steel producers but that's the reality.''
Vale is waiting for Australian iron-ore producers to settle contract prices with China before concluding its own agreements, Chief Executive Officer Roger Agnelli said last week. It has agreed to cut prices by 28 per cent for ArcelorMittal.
BHP Billiton, the world's third largest iron ore producer, doesn't make any announcements about the pricing of its long term contracts until the majority of its contracts are settled, BHP spokeswoman Samantha Evans said by phone from Melbourne.
12 / 06 / 09 in
China May copper imports hit record for 4th month
China's May imports of unwrought copper and semi-finished copper products hit a fresh high for the fourth straight month on continued arbitrage trade, though domestic consumption waned ahead of low seasonal demand in the summer.
Imports of unwrought aluminium and semi-finished aluminium products in May dropped 24.6 percent on the month due to reduced arrivals of booked arbitrage imports for primary aluminium after record inflows in April.
China, the world's top consumer of copper and aluminium, imported 422,666 tonnes of unwrought copper, including anode, refined and alloy, and semi-finished products, in May, up 5.7 percent from April's record 399,833 tonnes, data from the General Administration of Customs showed on Thursday.
01 / 06 / 09 in
Chinese iron ore price formula to help India
China's iron ore 'equilibrium' formula is likely to benefit Indian exporters of the ore more than its competitors Brazil and Australia, traders and exporters said.
The three stakeholders including overseas mineowners, Chinese steel mills and local mine owners are presently engaged in trying to thrashing out a formula for long term iron ore price that would be declared at ex-Chinese port. This means, the formula when ready, if implemented, the price of ore delivered at the Chinese port would remain the same irrespective of its origin and freight rates.
The development assumes significance especially from India’s point of view as Indian exporters would receive additional orders from China due to lower freight cost. On Tuesday, iron ore exporters to China have been struggling to chalk out a uniform price as Chinese importers always hesitate lifting contracted quantity if the spot price falls below the bilaterally negotiated price. Instead, they prefer to re-negotiate the price or switch to spot market to procure iron ore.
“Being geographically advantageous due to the lower freight rates compared to Brazil and Australia, India’s iron ore demand would certainly increase,” said Haresh Melwani, CEO, H L Nathurmal & Co, a miner and exporter from Goa.
According to trader sources, the three market forces are presently working overtime to chalk out a formula for the smooth functioning of steel mills. The decision is likely to come by the end of next month.
Freight rate is presently hovering in the range of $11-13 from all Indian ports compared to $26 from Brazil and $18-20 from Australia.
But, the world’s largest iron ore miners — Brazil and Australia — have advantages too. They can handle larger vessels, upto 300,000 tonnes which India cannot handle.
India has expertise in smaller vessels with a handling capacity in the range of 40,000 - 125,000 tonnes. This means if India wants to take advantage of the situation, it will have to improve the infrastructure to handle larger vessels, said Glenn Kalavampara, secretary of Goa Mineral Ore Exporters’ Association (GMOEA).
However, mini Chinese steel mills would continue to import iron ore from India as they do not require additional inventory, he added.
“Presently, the same thing is being practiced and we see no change in the “equilibrium” formula as exporters have to bear the brunt of the shipment cost. All prices are negotiated on a free-on-board (FOB) basis which means ex-Chinese port price,” said R K Sharma, secretary general of Federation of Indian Mineral Industries (FIMI).
The benchmark prices are announced by the three mining giants — Companhia Vale do Rio Doce (Vale), BHP Biliton and Rio Tinto — that are followed by every one. But, the ex-Chinese port price declaration will reduce re-negotiation practices, a trader said.
India exported about 105 million tonnes of iron ore mainly to China of which Goa constitutes over 45 per cent. Meanwhile, China imported a record 57 million tonnes of iron ore in April, an all-time high, up 9 per cent from a month ago and 33 per cent greater than last April.
20 / 05 / 09 in
China: Iron-ore imports to cool after hitting record in April
China's iron-ore imports are likely to weaken in coming weeks amid signs of overcapacity in the nation's steel industry and mounting losses among smaller producers, according to analysts.
Imports of iron ore in April reached 57 million tons, an increase of 9.5% on month and 33% from the same month a year earlier. The figures also mark the third-consecutive month of record shipments.
In the four months through April, iron-ore imports totaled 188.5 million tons, a rise of 22.9% from a year earlier.
Stockpiling has been driven in part by speculators who expect prices to rise as the global economy recovers. Dealers rank as the top five importers this year by volume, up from the two or three that rounded out the top 20 in the previous year, according to data released last week by the China Iron and Steel Association.
"We believe the rapid pace of iron-ore imports is likely to taper off in the coming months," wrote J.P. Morgan's Chairman of China Equities Jing Ulrich in a note Tuesday.
Stockpiles of iron ore are growing, with inventories at the nation's ports now estimated at 70.4 million tons, up from an average of 54 million tons throughout 2007. About 20 million tons of iron ore is now stockpiled at steel mills.
Much of the demand has come from smaller steel mills that have increased purchases to take advantage of the 40% decline in contract prices and cheaper shipping rates. Imported ores are also of a higher grade, spurring some steel makers to switch to the higher quality.
China currently consumes about half of the world's iron-ore output and is the "only significant spot market in the world," according to the Euromoney's price-tracking Metal Bulletin note released Monday.
Some of the rise in ore imports was a reflection of stronger seasonal demand for specialty-steel products in the construction industry ahead of the busy summer building season. New public-infrastructure works also played a role in this rise.
Higher demand was also seen in the automobile and shipbuilding industries.
Analysts say the industry, glutted with overcapacity, holds little prospect for a return to profitability for some time to come. In the first quarter, 48 producers posted combined losses of 4.35 billion yuan ($637.4 million), according to J.P. Morgan.
More losses are likely in an industry beset by production surpluses estimated at 25% to 30 % above real demand, according to estimates by the Ministry of Industry and Information Technology.
"Despite a stronger volume outlook, rampant overcapacity will continue to weigh on industry profitability," said Ulrich.
Seeking to curb the excess capacity, Beijing has directed commercial banks to limit or cancel loans to steel producers seeking to expand capacity.
14 / 05 / 09 in
China April iron ore imports at record; steel slumps
China imported record
amounts of iron ore in April and was also a net steel importer
for the second month running, as the industry grappled with
falling domestic ore output and slumping steel exports.
China imported a record 57 million tonnes of iron ore in
April, an all-time high, up 9 percent from a month ago and 33
percent greater than last April, the General Administration of
Customs said on Tuesday.
Customs data also showed China was a net importer of nearly
900,000 tonnes of crude steel, marking the second month running
that inflows have exceeded outflows for the country, which had
been a net steel exporter since 2005.
"All of them are surprising figures. The figures show that
oversupply is very likely to worsen in May and June," said a
senior trading executive in a state-owned steel mill, who asked
not to be identified as he was not authorised to speak to the
media.
"Domestic steel prices will not hold at the current level
for a long time," he added.
Steel product imports, at 1.62 million tonnes, exceeded
exports of 1.41 million tonnes, which were the lowest since
October 2004.
Traders said relatively high steel prices in China have
encouraged eastern European mills to ship products to China.
"The volume of steel imports was similar to monthly levels
in previous years, but we noticed that China imported more
low-value-added steel products from eastern European mills this
year, suggesting production costs there are much cheaper," said
Du Wei, an analyst for consultancy, Umetal.com.
Record iron ore imports reflected slowing domestic output
due to the high cost of production compared with mines in
places like Australia, Brazil and India, and that hunger for
foreign ore is also feeding into freight rates.
The Baltic Exchange's main sea freight index .BADI, which
tracks rates to ship dry bulk commodities, was at 2,215 points
on Tuesday, higher by 0.05 percent from a day ago, and near its
highest for the year so far -- a peak of 2,298 points was hit
in March. [ID:nLB720607].
"The massive imports reflected in the rising seaborne
freight index in the past months, and that trend could continue
in May and June as we do not expect a rapid fall in Chinese
iron ore imports in the near future," Du said.
Indeed, Indian iron ore prices have risen in the past few
days, lifted by Chinese buyers who are looking to save money on
rising freight costs by booking material from nearby suppliers.
A large miner-cum-exporter in east India said deals were
done on Friday for ores with 63.5 percent iron content at $66.5
and $67 with freight, up from $66.1 earlier last week.
[ID:nBOM404836]
"Since Thursday, demand has increased," the exporter said.
Iron ore stockpiles at Chinese ports edged up only 2
million tonnes in April, according to data from Chinica
Shipbrokers Ltd [ID:nSHA48456], implying that about 55 million
tonnes of imported ore found its way to mills and markets in
April.
"This means China's demand for imported iron ore is solid
and sustainable. I expect China's iron ore imports this year
could rise from last year," said analyst Henry Liu at Macquarie
Bank.
"It seems that talks about imported ore substituting
domestic-produced are real," he said.
Those 55 million tonnes of high-grade imported iron ore
translate into pig iron production of around 34 million tonnes,
or more than 80 percent of expected average monthly production
of around 42 million tonnes in China.
The record imports will be seized on as leverage by both
sides in annual benchmark iron ore price talks between China's
top mill, Baosteel (600019.SS) and the top miners, BHP Billiton
(BHP.AX)(BLT.L), Rio Tinto (RIO.AX)(RIO.L) and Vale (VALE5.SA).
Chinese steelmakers have been pushing for a 40 percent
price cut in this year's talks and an industry group executive
told Reuters Chinese steel mills were not able to afford high
ore prices due to their weak profits.
04 / 05 / 09 in
China deal to heal wounds of iron ore hopefuls
Despite the iron ore dive and Government security jitters, China is undeterred.
WATCH out for Bob Duffin's iron ore hopeful Western Plains Resources to come out of its trading halt today after securing a joint venture deal with China's Wuhan Iron and Steel on its Hawks Nest magnetite project in South Australia with a major Chinese steel group.
It is believed that Wuhan is to spend big to earn a 50 per cent equity in Hawks Nest, and to take a $3 million placement of WPG shares (15 per cent).
It's all welcome news for WPG, which previously traded at 28¢ a share for a market capitalisation of $26 million. But it also has some wider ramifications for the iron ore hopefuls that, like WPG, were riding high with their iron ore ambitions before the global financial crisis hit in September.
It demonstrates that despite the retreat in iron ore prices, China's steel industry is looking across the current valley of gloom to secure long-term supplies while it can.
The Chinese know that sooner or later, the 70 million tonnes of stockpiles sitting in Chinese ports will be gone and that long-term supply deals at supportive prices will come back in vogue.
WPG's deal will feed in to the national debate on Chinese investment in the resources sector, as well as potentially providing a template for future foreign investment in the Woomera Protected Area (WPA) — a 20 per cent chunk of SA controlled by the Defence Department.
Hawks Nest sits within the WPA, as does OZ Minerals' Prominent Hill copper-gold mine. OZ was recently forced to exclude Prominent Hill from its deal with China's Minmetals to secure Federal Government clearance for its rescue package.
So the old Woomera rocket range is a sensitive chunk of ground, even if the region's pastoralists are known to enjoy the occasional weapons testing "fireworks" from deck chairs.
The inclusion of a restriction on WPG's new partner from ever owning more than 50 per cent of the joint venture is expected. As is a condition that WPG can never be removed as the manager of the joint venture. WPG will be hoping that will placate Canberra and the Defence Department.
It will also be hoping that the entry of a big-spending Chinese partner into the Hawks Nest project will be enough to persuade the SA Government to crack the whip on the development of Port Bonython as a bulk export port.
Given that Hawks Nest is shaping up as a 30-year project of 10 million tonnes of magnetite concentrate annually, you would think there is incentive enough to get cracking on the $500 million port development.
After all, at current prices for magnetite of about $A100 a tonne, we're talking about a $1 billion annual export industry. As good as SA wines are, its wine industry doesn't get close to those figures.
23 / 04 / 09 in
CHINESE steel mills continue to target Australian iron ore miners to secure long-term contracts as domestic ore production dries up
Perth-based iron ore producer Territory Resources' chairman Andrew Simpson, who recently returned from visiting Chinese steel mills, said with the short-term spot price falling, a percentage of domestic Chinese suppliers were losing money.
"I am getting two to three inquiries a week from China about securing long-term contracts because there is that anticipation that a percentage of domestic production will stop," he said.
Mr Simpson added that the cost of domestic production in China would be a key determining factor on the final price settled in annual contract talks between the major miners and steel mills.
China produces about 800 million tonnes of iron ore a year, but much of that is low grade and high cost.
"The general consensus is at least 50 per cent of domestic producers in China, at the current spot prices, are under water, so even today a little company like Territory is being inundated with people from China wanting to write long-term contracts," Mr Simpson said.
He said he expected iron ore price negotiations to result in about a 35 per cent decline, which he said would be a fair and reasonable result.
"The majors pushing the price so high last year was a surprise and it damaged the trust with suppliers," he said.
"Chinese mills are still grumpy and now, with the oversupply in the market, it is their turn to bat and they have got the biggest bat out and there will be a few bumps before prices are settled."
Rio Tinto chief executive Tom Albanese declined to comment at the miner's annual general meeting on Monday on the annual iron ore talks between miners and Chinese and Japanese steel mills, leaving the task to his head of iron ore, Sam Walsh.
While Mr Walsh did not go into the price talks, he was keen to describe the mining major's potential upside in the Pilbara, in response to shareholder questions on whether the iron ore division would have benefited from BHP's bid for its rival.
Mr Walsh said there were obviously still potential iron ore synergies between Rio and BHP, but a better option for the miner would be to expand its port at Cape Lambert in Western Australia. "Cape Lambert is readily expandable from 80 million tonnes to 100 million tonnes or beyond," Mr Walsh said. "Port expansion for BHP will be more difficult, and we are very well positioned (in relation to) the synergy value we can deliver to our own business."
08 / 04 / 09 in
Australian ore magnate sued for alleged deception
Billionaire mining magnate Andrew Forrest deceived and misled investors by overstating deals his company, Fortescue Metals Group, had struck with Chinese state-owned companies in 2004, a regulator alleged in court on Monday.
Forrest should be disqualified from being a company director and be fined 4.4 million Australian dollars ($3 million), the Australia Securities and Investments Commission said. Fortescue, Australia's third-largest iron ore exporter, should be fined an additional AU$6 million ($4.3 million), it said.
The commission is suing Forrest and his company over a series of press and market announcements between Aug. 23 2004 and Nov. 8 2004 about agreements with three state-owned Chinese companies.
Commission lawyer Neil Young told the Federal Court that Forrest was involved in preparing the statements, which claimed Fortescue had binding contracts with China Railway Engineering Corp. to build a railway, China Habor Engineering Corp. to construct a port and the China Metallurgical Construction Corp. to build a processing plant.
The announcements had resulted in Fortescue's share price rising sharply.
But the deals were not binding, and this was not disclosed until 2005, the commission said.
Forrest and Fortescue were "aware of the gap" between the public statements and the true status of the deals, and for six months failed to correct the record, Young said.
"Mr. Forrest breached his duty as a director to exercise care and diligence ... to comply with disclosure obligations and in doing so, exposed Fortescue to risk and harm," Young said.
Fortescue has said it will "vigorously defend" the commission's claims. Forrest did not appear in court Monday.
Forrest, the CEO and executive director of Fortescue, rocketed from relative obscurity to become Australia's richest man on the back of rich iron ore deposits in the Pilbara region of remote northwestern Australia.
He remains among the wealthiest Australians, though the title of the country's richest man slipped in the past year as the global downturn hit mining companies.
Fortescue shares closed two percent lower Monday at AU$2.45.
Last week, Fortescue won government approval for a AU$645 million ($440 million) deal with Hunan Valin Iron and Steel Group that allows the state-owned Chinese company to almost double its stake in the mining company to more than 17 percent.
Chinese metals companies are flush with cash from supplying the country's manufacturing boom and are looking for investments abroad that will let them profit from future demand.
28 / 03 / 09 in
Iron Ore Oversupply May Lead to Discounts, Mysteel Forecasts
Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group, the three largest iron ore producers, may engage in a discount competition in China because of an oversupply, Mysteel Research Institute said.
Iron ore sales to Europe and Japan by the three companies may drop by more than 100 million metric tons this year, forcing them to sell more to China should they not slash production, analyst Xu Xiangchun said in Beijing at a conference today.
Benchmark contract prices for the steelmaking material may drop for two years, undermined by “whopping oversupply,” Citigroup Inc. said March 24. Steelmakers in Europe and Japan are slashing output and cutting jobs as the global recession curbs demand from carmakers and builders.
“Cutting prices will be the only way for miners to sell their additional supplies to China,” Xu said. “Miners will eventually have to sell at lower prices on the spot market.”
Cash prices of iron ore imported by China, the world’s biggest buyer, fell for a second week last week. Prices had dropped to 600 yuan ($88) a metric ton.
The three iron ore producers, which account for about three-quarters of the traded material, will have to compete with Indian and Chinese products, Xu said. Iron ore miners and steelmakers are now in talks to set annual benchmark contract prices for the year starting April 1.
Steel prices in China have dropped 13 percent since February after production had jumped on expectations of revived demand spurred by the government’s 4 trillion yuan ($585 billion) stimulus plan. Beijing-based Shougang Corp. this month called for steelmakers to cut output by 20 percent.
“Chinese steelmakers, whether big or small ones, are very reluctant to cut production,” said Xu. Prices may recover only when daily production drops below 1.25 million metric tons, he said.
China’s crude steel production was 40.4 million tons in February, equivalent to 1.33 million tons of daily output, according to figures from the National Bureau of Statistics.
19 / 03 / 09 in
Low China demand hits iron ore exports
India’s iron ore exports may not achieve last year’s figure of 104.27 million tonnes because of a steep fall in demand from China, the largest buyer of Indian steelmaking raw material.
Chinese demand started declining last month and continued till now. Spot orders from China has dried up completely, while traders are waiting for the revival trend to emerge in the global economy for fresh contracts for the new financial year. India exports over 85 per cent of its total iron ore to China.
In January, China’s finished steel production declined sharply by 54 per cent to 1.91 million tonnes from the comparable period last year. According to an analyst, global crude steel production is expected to fall by 9 per cent to 1.210 billion tonnes this year, which will be the first drop in output since 1998.
“Looking at the spot orders in December, January and February we were confident to achieve this figure. But, we are doubtful now,” said R K Sharma, Secretary General of Federation of Indian Minerals Industries (FIMI).
After a sluggish trade in October and November, post debacle of Lehman Brothers that dumped global economies into a threat of recession, sales resumed in early this year. According to industry sources, the two aforesaid months witnessed a total export decline of 15-20 per cent that recovered in the subsequent three months.
Shipment from Bellary-Hospet iron ore zone has declined substantially with no major exports orders have been recorded so far this months.
Only existing orders are being executed. From Goa, also, exports are expected to halve to about 3 million tonnes in March this year from the last year’s level of 6 million tonnes in the corresponding month last year.
“Off take from China is very low which is likely to continue for some more months. Therefore, iron ore shipment from Goa is expected to remain grim in the months ahead. For the current financial year, however, total exports from Goan and non-Goan iron ore from the state is expected to remain closed to 39.5 million tonnes, same as last year,” said Glenn Kalavampara, Secretary, of Goa Mineral Ore Exporters’ Association (GMOEA).
In the previous three months, however, total shipment from Goa zoomed to approximately 17 million tonnes, a rise of 20 per cent from the same period last year.
Meanwhile, prices of iron ore have declined by 20 per cent since the last week of February from the level between $55-60 per tonne to $48-50 per tonne. There is no buyer even at $48 per tonne, said Sharma.
Global steel demand is currently down around 20 per cent, but with destocking nearing an end, the industry is likely to see some signs of recovery by the end of the year.
China, the world’s largest steel producer with an annual output of about 500 million tonnes, witnessed a marginal 2.6 per cent rise in steel production against the global output decline of 1.2 per cent.
In turn, Chinese steel exports have also declined dramatically by 63.5 per cent to the South Korea and 75 per cent to the European Union in December 2008.
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