Iron Ore Prices

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Iron ore price slump not slowing miners
DOW JONES OCTOBER 24, 2014 9:47AM

BHP Billiton's Mt Whaleback iron ore mine in the Pilbara.BHP Billiton's Mt Whaleback iron ore mine in the Pilbara. Source: Supplied
Time for an iron ore reality checkBHP Billiton's Mt Whaleback iron ore min...

IRON ore prices may be at a six-year low, but the world’s leading mining companies don’t show any sign of idling their diggers.

That was the message sent by Vale, Rio Tinto, BHP Billiton and Anglo American overnight.

Brazil’s Vale, the world’s biggest iron-ore miner by output, said it was on track to produce a record amount of the steelmaking ingredient in 2014 despite a 40 per cent fall in the metal’s price this year.

Separately, the world’s second-largest producer, Rio Tinto (RIO), said it would extend the tenure of chief executive Sam Walsh, who has pursued a strategy of guarding market share despite slacker demand growth from key customers like China.

Meanwhile, BHP Billiton (BHP) boss Andrew Mackenzie defended the Anglo-Australian giant’s decision to stay the course, telling journalists on the sidelines of the company’s annual general meeting that it was economically rational for low-cost miners like BHP to continue producing because they could still achieve very high margins.

“We believe in free markets, we believe in being the lowest cost producer, and we don’t believe the lowest cost producer should be the swing producer,” Mr Mackenzie said.

He also rejected criticism that Vale, Rio and BHP were behaving like a cartel in attempting to squeeze higher-cost rivals out of the market.

“Completely wrong. Normally people collude to drive prices up,” Mr Mackenzie said.

Anglo American, the world’s fourth-largest producer of seaborne iron ore, has previously warned about the growing iron ore supply glut.

But these concerns haven’t stood in the way of Anglo raising its own output. Yesterday, the company said it produced 13 million tonnes of iron ore in the third quarter, up 37 per cent from a year ago.

The rise in iron ore output as prices fall has sparked criticism from within the mining industry. Glencore chief executive Ivan Glasenberg has said ballooning production is overwhelming demand.

Others have warned that by not leaving some tonnes in the ground, mining companies risk damage to their future profits.

“Under the most pessimistic but still plausible scenario we can see a floor as low as $US66 a tonne,” Paul Gait, a research analyst at Sanford C Bernstein, said.

Mr Mackenzie said that making any assumptions about future prices was a “very dangerous game to play.” He said holding back output from already-producing mines in response to weaker demand would lead to higher costs and lower profit margins.

“Our intention is always to maximise the production from existing capacity, that is the way in which we’ve achieved some of the lowest costs,” Mr Mackenzie said.

Dow Jones

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BHP talks down iron ore price rebound
THE AUSTRALIAN OCTOBER 25, 2014 12:00AM

Barry FitzGerald

Resources Editor
Melbourne
Time for an iron ore reality check

BHP Indigenous Education ProgramBHP Billiton chief executive Andrew Mackenzie at the launch of a $30m indigenous education program in Canberra. Picture: Ray Strange Source: News Corp Australia
Time for an iron ore reality checkBHP Indigenous Education Program

BHP Billiton has been put in the unusual position of having to talk down the prospect of a rebound in iron ore prices to help justify tipping more tonnes into the oversupplied market in the face of criticism from West Australian Premier Colin Barnett and others.

Speaking after the group’s London annual meeting on Thursday, chief executive Andrew Mackenzie said it would be a “very dangerous game to play’’ to hold back production and wait for higher prices.

“You are assuming that there will be a period in the future of higher price,’’ he said.

Iron ore prices have collapsed from last calendar year’s average of $US135 a tonne to $US80 a tonne during the week.

“We have always been of the view, and we have said this quite strongly, that the iron ore market has more likelihood to decline than rise ... producing the maximum amount you can now, without investing any more capital, is very sensible,’’ Mr Mackenzie said.

He declined to make price forecasts but said BHP had “been very clear in our investor presentations that we see the iron ore curve flattening, as an increasing amount of low-cost supply is added to the market and the demand for iron ore moderates through the creation of more opportunities to recycle steel’’.

Despite the collapse in prices BHP and Rio Tinto continue to enjoy fat margins on their Pilbara iron, with estimated total costs of $US45-$US50 a tonne.

As previously announced, BHP has set out to become the lowest cost Pilbara producer.

“The lowest cost producer has a right to continue producing at very high margins in the free markets,’’ Mr Mackenzie said.

Last week, Mr Barnett accused BHP and Rio Tinto of acting “seemingly in a concert way” by tipping more low-cost iron ore into the market. WA’s state finances are under pressure, with the collapse in prices slashing state royalties.

“I find it a strange policy, indeed a flawed policy, that the major iron ore producers would be putting more and more product into a declining, soft market,” Mr Barnett said last week.

Mr Barnett later backed away from suggestions of collusion. But in case there was any doubt, Mr Mackenzie said it was “completely wrong’’.

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Bluescope warns on China steel demand
STAFF REPORTER OCTOBER 27, 2014 7:30AM

BlueScope Steel chief executive, Paul O’Malley, has warned China's steel boom is over, with customers moving back to the US where energy costs are lower, The Australian Financial Review reports.

“What we’re seeing on the ground is a significant reduction in confidence domestically within China as it pertains to building and construction, which is where a lot of steel goes,” Mr O’Malley said, according to the newspaper.

“Yes there is still growth [which] may well return, but at the moment, the heyday is over.”

The AFR reports that Mr O'Malley has been pushing the argument that China has reached its peak steel intensity for some years.

“As a global trend we are seeing ­customers that were building in China are now building in the United States," he said.

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Iron ore falls further below $US80
DANIEL PALMER BUSINESS SPECTATOR OCTOBER 29, 2014 9:45AM



THE iron ore price is at risk of touching new five-year lows after losing 1 per cent in overnight trade.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US78.80 a tonne, down 1 per cent from its previous close of $US79.60.

The weakness capped a third straight day of losses, with the commodity sinking below $US80 for the first time in a fortnight during the losing streak.

It now hovers just $US1.20 above the five-year low it reached at the end of September, as investors continue to fret about the imbalance between surging supply and moderating demand growth.

Business Spectator

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Vale swings to Q3 loss on iron ore prices
DOW JONES NEWSWIRES WITH A STAFF REPORTER OCTOBER 30, 2014 10:00PM

Brazilian mining giant Vale SA surprised investors on Thursday by coughing up a net loss in the third quarter due a sharp depreciation in the local currency and the lowest iron-ore prices since 2010.

Vale posted a $US1.44 billion loss in the July-to-September period, against a net profit of $US3.5 billion a year earlier. The result was far worse than the market expected, with a survey of analysts by FactSet producing a median estimate for a $US1.49 billion net profit.

Pulling Vale's bottom line into the red were nearly $US3 billion in losses related to foreign exchange and derivatives, reflecting an 11 per cent depreciation of the Brazilian real between the end of June and the end of September. Since Vale's debt is mostly denominated in dollars, the weaker real increased the value its debt as expressed in reais, creating a "mainly noncash" effect.

There was also trouble in the market for iron ore, of which Vale is the world's leading producer. Prices for the commodity plummeted in the third quarter amid surging supply and moderating demand in China. Vale's average sales price for iron ore sank 36 per cent from a year earlier to $US68 per tonne -- the lowest level since the first quarter of 2010.

The company, which produced a record 85.7 million metric tons of the steelmaking ingredient during the third quarter, also struggled to cash in that bonanza, as its inventories rose by 9.3 million tons. Protests that closed its main railroad in northern Brazil, and the opening of a new distribution center in Malaysia contributed to stockpiles.

"We will be selling those tons in the near future, but we didn't do that in the third quarter," chief financial officer Luciano Siani said in a video posted to the company's website.

Since ferrous metals, mostly iron ore, account for nearly two-thirds of Vale's sales, the company's net revenues sank 27 per cent in the third quarter from a year earlier to $US9.06 billion.

Earnings before interest, taxes, depreciation and amortization, or ebitda, slid 48 per cent on the year to $US3 billion.

The latter figure was bolstered by record output of copper in the third quarter and higher production and prices for nickel, of which Vale is the world's second-largest producer. Vale's ebitda from base metals soared 158 per cent to $US781 million, the highest cash flow posted by the division since the first quarter of 2011.

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Iron ore shipments from Port Hedland hit new high
THE AUSTRALIAN NOVEMBER 05, 2014 12:00AM

Paul Garvey

Resources Reporter
Perth
IRON ore shipments out of Port Hedland have swollen to another monthly record, underscoring the continued supply surge that has driven down prices this year.

The latest data from the Port Hedland Port Authority showed that 37.5 million tonnes were shipped from the port last month.

The figure set a new monthly record for Port Hedland, which is the world’s busiest iron ore port, eclipsing the 37.4 million tonnes shipped in August. The figure represented a 3.1 per cent improvement from September.

Iron ore prices have fallen by about 40 per cent this year in response to a surge in new supply and a softening in demand out of China, the world’s biggest consumer of the steelmaking ingredient.

The dramatic growth in supply has been led by Australian iron ore producers BHP Billiton, Rio Tinto and Fortescue Metals Group.

The volume shipped last month was up a huge 29.5 per cent from October last year, reflecting the significant rise in production capacity over the past year. BHP and Fortescue are Port Hedland’s key tenants, accounting for the bulk of the ore shipped through the port, while smaller players Atlas Iron and BC Iron also move their material through the port.

The sharp increase in output and the plans of BHP, Rio Tinto and Fortescue to continue increasing their output have drawn criticism from West Australian Premier Colin Barnett, who has accused the majors of trying to squeeze smaller players out of business.

Small West Australian iron ore miner Pluton Resources collapsed into administration earlier this week, following in the path of Northern Territory miner Western Desert Resources and South Australia’s Termite Resources.

The benchmark spot price for ore containing 63 per cent iron was last trading at $US78.63 a tonne. That compares to a peak of $US160.78 a tonne in February last year.

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Iron ore slumps to new five-year low
BUSINESS SPECTATOR NOVEMBER 05, 2014 7:18AM

THE iron ore price has sunk to a new five-year low in overnight trade as worries about the Chinese economy continue to weigh on commodity prices.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US77.10 a tonne, down 0.9 per cent from its previous close of $US77.80.

The move downward over the past fortnight, from levels comfortably above US80 a tonne, has seen the commodity dip below the five-year low of $US77.50 a tonne it reached at the end of September this year. That level was the deepest trough since September 2009.

Overall, iron ore has lost over 40 per cent in 2014, with the first three quarters of the year each seeing double-digit percentage declines as large producers ramp up supply at a time when Chinese demand growth is stalling.

“Demand remains weak as Chinese buyers sit on the sidelines with many steel mills forced to halt production leading up to the APEC meeting,” analysts at ANZ told clients in a note yesterday.

The last quarter of the year is typically a strong one amid Chinese stockpiling ahead of winter and the Chinese New Year holiday.

Business Spectator

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Iron ore prices hit new lows as China curbs steel output ahead of APEC
THE AUSTRALIAN NOVEMBER 06, 2014 12:00AM

Matt Chambers

Resources Reporter
Melbourne

The stockpiles of iron ore at the Tianjin port have fallen.
The iron ore port in Tianjin, China. Ore prices fell to $US77.1 a tonne on Tuesday. Source: Supplied

THE tumble in iron ore has continued, with prices hitting new five-year lows, thanks partly to a move to help the vistas and health of Tony Abbott and other world leaders headed to Beijing this weekend.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US76.00 a tonne, down 1.4 per cent from its previous close of $US77.10.

It continues a sharp decline for the commodity over the past fortnight after it had staged a strong, if brief, recovery back to levels comfortably above $US80 a tonne by mid-October.

In all the iron ore price has given up about 44 per cent in 2014, with the most recent trough representing the lowest level seen since June 2009.

Adding to new Australian supplies that have flooded the market all year, even as Chinese steel demand growth has faltered, are reports that steel mills in Beijing have been ordered to suspend production in the lead-up to the Asia-Pacific Economic Co-operation forum that starts tomorrow in the capital.

“Spot iron ore fell on ongoing concerns over weak demand around the APEC meeting in Beijing,” ANZ Bank said in a client note. “Sentiment was also hit by an increase in iron ore stockpiles at Chinese ports.”

The temporary steel mill ­closures are aimed at reducing smog in the city, where Mr Abbott, US President Barack Obama, Russian President Vladimir Putin and others will be attending the forum.

“Steel mills in Hebei have been asked to suspend production due to APEC, which affects iron ore demand temporarily,” said Yi Zhu, a Hong Kong-based metals and mining analyst at Bloomberg Intelligence.

“The mills will resume producing after the conference.” Bloomberg said most cuts would happen in Hebei, the biggest steel producing region that surrounds the capital, and Shandong, the third-biggest.

Smaller iron ore stocks suffered yesterday but the bigger stocks were not hit badly by the short-term halt in production.

Atlas Iron fell 7 per cent and Gindalbie Metals lost 8 per cent. Andrew Forrest’s Fortescue Metals Group slipped 1.8 per cent while BHP Billiton and Rio Tinto lost 0.6 per cent and 0.3 per cent respectively.

Anglo American, which has finally started its Minas-Rio iron ore project in Brazil four years behind schedule, said any recovery could take 18 months, scotching hopes of an end-of-year rally. Paulo Castellari, chief executive of Anglo’s iron ore unit in Brazil, said iron ore prices would probably trade between $US75 and $US80 in the short term. “We will have another readjustment starting in 12 to 18 months because we know a lot of people won’t survive with prices between $US70 to $US90,” he said.

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Fortescue, Atlas, Arrium shares dive as iron ore prices slide
THE AUSTRALIAN NOVEMBER 07, 2014 12:00AM

Matt Chambers

Resources Reporter
Melbourne
Resources Conference

Fortescue CEO Nev Power at the resources conference in Melbourne on Wednesday night. Picture: David Geraghty Source: News Corp Australia
IRON ore stocks copped another pasting yesterday after prices of the nation’s biggest export fell on Wednesday night and Chinese futures trading signalled there would be more of the same last night.

Fortescue Metals Group was hit hard by the falling price, unlike the lower-cost BHP Billiton and Rio Tinto and despite Fortescue chief executive Nev Power’s message to a Melbourne function that there was little advantage in being diversified across a range of commodities.

Adding to the bad news for Fortescue, Atlas Iron and BHP there was renewed talk of a tugboat engineers’ strike in Port Hedland.

On Wednesday night, iron ore prices monitored by Platts’ The Steel Index fell $US1.10, or 1.4 per cent, to a fresh five-year low of $US76 a tonne. Pointing to another fall overnight, Chinese iron ore futures slipped 1.6 per cent yesterday, which weighed further on iron ore stocks with slim margins at current prices.

Fortescue finished 28c, or 8.5 per cent, lower yesterday at a 16-month low of $3.03. Atlas Iron fell 4.5c, or 17 per cent, to a nine-year low of 22.5c and iron ore miner and steelmaker Arrium fell 1.5c, or 4.6 per cent, to 31c, its lowest since it was spun out of BHP in 2000. Rio Tinto and BHP Billiton, who are still making good money at current prices, fell 0.1 per cent and 0.3 per cent respectively.

Credit Suisse analyst Paul McTaggart said all-in cash margins, including freight, sustaining capital and interests for BHP and Rio at $US80 iron ore would be over $US30 a tonne.

It is about $US10 for Fortescue, reduced to $US6 at current prices.

“The bears might say that FMG is the next block of Western production that is likely to feel the heat but we’d disagree with this assessment,” Mr McTaggart said in a note to clients.

Mr Power was upbeat at a presentation to a London Metals Exchange Downunder dinner in Melbourne, but he did not address the iron ore price.

“China is currently the growth engine for driving commodities demand globally,” Mr Power said, noting 300 million people were still expected to move from rural areas to urban ones in the next decade, providing “insatiable demand” for steel.

And he said iron ore’s prospects were not that different to all commodities.

“To me it doesn’t matter too much if you’re diversified across a range of different commodities, it probably still depends on China to determine what the success is going to be. Long-term there is going to be a lot of demand outside China but for now it is a phenomenal market to have on our doorstep.”

Iron ore prices have slumped 43 per cent this year as BHP, Rio and Fortescue flood the market with iron ore from expansions approved during the boom.

They all plan to continue ramping up expansion as well, with BHP and Rio flagging an extra 30 million tonnes a year each and Fortescue up to 20 million.

Mr McTaggart said he expected iron ore prices to rise towards the end of the year.

“Near-term challenges for the iron ore market are plentiful — however, the aggregate iron ore stock position is normal at 10 weeks and China domestic mill (iron ore) production will soon be heading into the winter’s shutdown,” he said.

The tugboat strike, by members of the Australian Institute of Marine and Power Engineers, is only for four hours at low tide next week and unlikely to cause much disruption.=

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Rio Tinto chief denies iron ore price collusion to destroy competition
CHUIN-WEI YAP THE WALL STREET JOURNAL NOVEMBER 10, 2014 12:00AM

Sam Walsh
Rio Tinto CEO Sam Walsh says Chinese demand still underpins a robust outlook for iron ore. Picture: David Moir Source: News Corp Australia
RIO Tinto chief executive Sam Walsh has defended the Anglo-Australian mining giant’s iron ore supply expansion and dismissed claims that the strategy was co­ordinated among global producers to drive out competition as “absolute nonsense”.

In an interview with The Wall Street Journal at the weekend, Mr Walsh said Rio made its expansion plans “upwards of five years ago” and suggestions that the company wanted to push iron ore prices down, along with other major producers, had “no truth”.

Rio and the world’s other big mining companies are adding hundreds of millions of tonnes of new production capacity to their operations, sending prices of the steelmaking mineral to their ­lowest in five years and taking a toll on smaller, higher-cost ore producers.

The move has also eaten into government royalties at Rio’s base in Western Australia. Premier Colin Barnett last month warned in remarks to the state parliament that major producers were risking regulatory attention from the World Trade Organisation and European trade officials if the oversupply went on.

“The projects were fully approved by Premier Barnett, as minister for state development. At the time, his government thought that projects were a good initiative,” said Mr Walsh, who is in Beijing attending a regional business conference.

Chinese government agencies and others have often accused Rio, the world’s No 2 iron ore miner, BHP Billiton and Brazil’s Vale of working together to affect market prices. All three companies have denied such activities.

Analysts have suggested that the trio’s simultaneous supply expansion is part of efforts to crowd out smaller competitors, including Chinese companies that have invested in iron ore plants abroad. A Shenzhen-listed unit of Anshan Iron and Steel Group, which owns a majority stake in the Karara iron ore project in WA, said earlier this year that the price drop led to a decision to reduce Karara’s production and contributed to a $US640 million writedown on the project.

“There’s been some comments that we’re doing this to affect others,” Mr Walsh said. “That’s not true. We’re doing this because it makes sound economic sense for Rio Tinto.”

Mr Walsh said Rio’s strength lay in its ability to survive narrowing margins. “We are the lowest-cost producer in the world. If you’re the lowest-cost producer, you will be in a particularly privileged position, so we’re continuing to invest on that basis,” he said.

Among the critics of Rio’s supply expansion is commodity conglomerate Glencore, which in July proposed a merger with Rio that would have produced the world’s largest miner. Rio rejected the proposal, and Mr Walsh reaffirmed the position, describing commodity trading companies — Glencore’s core capability — as having “a very different view of the world” from miners such as Rio.

Mr Walsh said that despite an economic slowdown, Chinese demand still underpinned a robust outlook for iron ore. A transition by China to an economy more driven by consumption meant more demand for Rio-produced commodities to make cars and refrigerators, he said.

China’s efforts to combat pollution would also mean higher demand for the sort of cleaner-burning ore Rio could produce.

Rio is partnering with Aluminum of China, or Chinalco, to develop the Simandou iron ore project in Guinea, a project so vast that it has been touted as the largest and highest-quality untapped reserve of its kind in the world.

But Simandou has been dogged by disputes over the terms of the lease — exports were not expected to start until the end of 2018, Mr Walsh said — and most recently by the Ebola outbreak, which has brought economic activity in parts of West Africa to a near standstill.

Mr Walsh said Rio and Chin­alco would jointly donate $US2.6m ($3m) worth of equipment and other goods and materials to Guinea’s government to cope with the disease.