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Iron Ore

Iron Billionaire Mauls ‘Market Vandalism’ as Rio Tinto Hits Back – by Jasmine Ng and David Stringer (Bloomberg News – August 23, 2015)

http://www.bloomberg.com/

Iron ore prices collapsed this year as the biggest miners committed market vandalism by overproducing, according to Fortescue Metals Group Ltd. Rio Tinto Group fired a salvo in response, saying the analysis is overblown.

“The logic that you keep expanding just because you can squeeze an extra ton out of your machines, applies well to mining juniors,” Chairman Andrew Forrest said in a commentary on Monday as the company reported a slump in full-year profit. But it “is market vandalism and self-harm when industry leaders do it,” he said, without identifying any companies.

Iron ore sank last month to the lowest in at least six years as Rio Tinto and BHP Billiton Ltd. in Australia and Brazil’s Vale SA boosted cheap supply, betting higher volumes would offset lower prices. Fortescue will hold volumes steady this year, although it was ready to expand if demand revived, according to Forrest. Rio said Monday that Forrest’s remarks about the market were inconsistent, while BHP declined to comment.

“Iron ore is inelastic in demand,” Forrest said using a term that suggests consumption doesn’t change with price.
Once users’ demand has been met, “any further product offering will see the price collapse. We have seen that this year.”

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Cheap Australian iron ore feeding China steel glut ‘like a bad virus’ – by Jasmine Ng (Bloomberg/Sydney Morning Herald – August 21, 2015)

http://www.smh.com.au/

Steel exports from China will surge to more than 100 million metric tons this year as local mills benefit from cheap iron ore to produce more than Asia’s top economy needs, according to Cliffs Natural Resources.

“It’s like a bad virus,” Lourenco Goncalves, chief executive officer of the largest US iron-ore producer, said in a phone interview from the company’s headquarters in Cleveland. “Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”

Shipments from the biggest producer are headed for a record this year as slowing local demand prompts mills to seek overseas buyers, driving down prices and spurring trade tensions from the US to India.

At the same time, the largest iron-ore miners including Australia’s Rio Tinto Group are boosting output to expand sales. China’s steel shipments were called extraordinary by Credit Suisse Group, which said last month they were now in line with total output from Japan, the No. 2 producer.

“What China is exporting alone is bigger than the second-biggest producer of steel in the world: it is crazy,” Goncalves said on Wednesday.

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Wabush pensioners angry about prospect of reduced incomes – by Terry Roberts (CBC News Newfoundland – August 18, 2015)

http://www.cbc.ca/news/canada/newfoundland-labrador/

Former mine workers fearful of a hit if Cliffs Natural Resources winds up Canadian operations

Retired workers at the now closed Wabush Mines in Labrador West say they are facing a cut in their pension incomes as their former employer, U.S-based Cliffs Natural Resources, goes through the bankruptcy protection process for its Canadian operations.

More than 100 former workers filed into the Catholic church in Wabush Monday for an information session with pension experts from the provincial government, which oversees the Pensions Benefits Act.

The closed-door meeting lasted nearly three hours into Monday evening, and was described as a tense, emotional affairs as retirees sought answers about the fate of their pensions.

Ron Barron, who worked 27 years at the mine prior to its closure in 2014, said there’s a growing level of frustration, and people want answers.

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Century Iron Mines sells eggs as Australia moves from mining to dining – by Andy Hoffman (Australian Financial Review – August 19, 2015)

http://www.afr.com/

The iron-ore business is so lousy that one Canadian mining company is shelving its biggest project and starting a new venture: selling Australian eggs to China.

The abrupt shift at Century Iron Mines was prompted by a global iron-ore surplus that sent prices plunging 68 per cent in four years. Chief executive officer Sandy Chim does not expect a recovery until 2018, so he’s taken a cue from Australian mining billionaires Gina Rinehart and Andrew Forrest, who are expanding into food production as demand rises across Asia.

“Australia is going from mining to dining,” Chim said by phone from Toronto, where the company created a unit called Century Food. The plan is to distribute eggs produced by Sunny Queen, a chicken-farmer cooperative in Queensland, to consumers in Hong Kong and Macau.

With the backing of Wuhan Iron & Steel and China Minmetals, the government-owned companies that own 30 per cent of Century Iron Mines, Chim is investing $C2 million ($2.04 million) in the egg venture. He’s drawing on capital originally intended for Century’s flagship Joyce Lake mine project straddling the Canadian provinces of Quebec, and Newfoundland and Labrador.

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Essar Steel places big bet on US iron ore – by Aaron Stanley (Financial Times – August 18, 2015)

http://www.ft.com/intl/

Hibbing, Minnesota – On an abandoned iron ore deposit just outside of Hibbing, Minnesota — the boyhood home of Bob Dylan — India’s Essar Steel is ramping up construction on a $1.9bn mining and processing facility.

On planned completion in the second quarter of 2016 it hopes to produce 7m tonnes annually of high-grade iron ore pellets for 70-80 years.

After being delayed several times by financing problems during the recession, the project — one of the largest greenfield construction projects in North America by capital expenditure — will be the first new facility in 40 years on Minnesota’s Mesabi Iron Range. The 150km stretch of the richest iron ore deposits in North America has powered the Great Lakes steel mills and US industrialisation for more than a century.

But the massive construction project comes as other US iron and steel companies cut production in the face of low global iron ore prices and cheap steel imports.

Essar, a $39bn conglomerate whose Canadian steelmaking operation recently emerged from bankruptcy protection, is placing a large bet on a new boom in US manufacturing that will create more demand for high-grade, domestically produced steel.

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Explosion in China disrupts oil, iron ore shipments at world’s 10th largest port in Tianjin – by Erika Kinetz (Associated Press/Global News – August 13, 2015)

http://globalnews.ca/news/

SHANGHAI – Explosions that sent huge fireballs through China’s Tianjin port have disrupted the flow of cars, oil, iron ore and other items through the world’s 10th largest port.

The blast sent shipping containers tumbling into one another, leaving them in bent, charred piles. Rows of new cars, lined up on vast lots for distribution across China, were reduced to blackened carcasses.

Ships carrying oil and “hazardous products” were barred from the port Thursday, the Tianjin Maritime Safety Administration said on its official microblog. It also said vessels were not allowed to enter the central port zone, which is near the blast site.

Tianjin is the 10th largest port in the world by container volume, according to the World Shipping Council, moving more containers than the ports of Rotterdam, Hamburg and Los Angeles. It handles vast quantities of metal ore, coal, steel, cars and crude oil.

Australian mining giant BHP Billiton said the blast had disrupted iron ore shipments and port operations, but had not damaged any iron ore at the port. “We are working with our customers to minimize any potential impact,” it said in a statement Thursday.

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[Australia] Samsung races to deliver Roy Hill – by Tess Ingram (Sydney Morning Herald – August 13, 2015)

http://www.smh.com.au/

Contractors building Gina Rinehart’s $10 billion Roy Hill project have been forced to send hundreds of workers to the Pilbara to try to avoid hefty penalty fees for delays finishing the project.

Head contractor Samsung C&T and its subcontractors have been racing to ensure they meet Roy Hill’s aggressive deadline to ship its first ore, which was slated for next month but now not expected until October.

If the first shipment does not sail by the end of October, Samsung faces penalty fees of almost $2 million for each day the project is late.

Sources said between 1000 and 1500 workers, unable to be accommodated at Roy Hill’s onsite accommodation, were being housed in various sites around the Pilbara town of Newman, about a three-hour round trip from Roy Hill.

A Roy Hill spokeswoman confirmed about 1100 workers were being housed in Newman “and have been for more than three months as part of Samsung’s efforts to meet schedule”.

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It’s a double-dose of uncertainty for Labrador’s iron ore industry – by Terry Roberts (CBC News Newfoundland – August 11, 2015)

http://www.cbc.ca/news/canada/newfoundland-labrador/

Canadian analyst says IOC in danger of closing, while hope fades for Alderon’s Kami Project

here’s more unsettling news for the iron ore industry in Labrador West after a Canadian investment firm suggested IOC is in danger of closing, while hope continues to fade for Alderon’s much-hyped Kami Project.

A report by Raymond James Ltd., suggested that mining giant Rio Tinto, majority owner of the Iron Ore Company of Canada, is losing money at its Labrador City operation, which employs an estimated 2,000 workers.

“Iron ore prices continue to weaken and by our estimates are below the operating cost at the mine,” the firm wrote in an investment overview published in late April.

Analysts at Raymond James estimate IOC will receive an average price of US$62.50 per tonne this year while costs are estimated at $US68.50.

One analyst said the operation is a “drain” on Rio Tinto and “we believe there is a risk IOC may close if its costs and productivity do not improve.”

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Baffinland ships first load of iron ore to Germany from Nunavut mine (Nunatsiaq News – August 11, 2015)

http://www.nunatsiaqonline.ca/

Mary River ore heads off to Germany

The first load of iron ore from the Mary River iron mine on northern Baffin Island is now on its way to Germany, Baffinland Iron Mines Corp. said Aug. 10.

A bulk ore vessel, the Federal Tiber, departed from the mine’s Milne Inlet port Aug. 8 carrying 53,624 tonnes of iron ore.

The ship is bound for the North Sea port of Nordenham, Germany where its cargo will be offloaded and eventually used to make high quality steel, Baffinland said.

“This is a great moment for Baffinland, its investors, and its employees, who have worked hard to reach this goal. In just two years, the men and women who work at the site, both Inuit or southern, have collaborated to build the mine and its infrastructure and have now moved the new port into full operation — this is their achievement and they can be proud of what they have accomplished,È Tom Paddon, Baffinland’s president and CEO said in a company statement on the first ore shipment.

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How Rio Tinto plans to cut costs by $US1 billion – by Amanda Saunders (Sydney Morning Herald – August 10, 2015)

http://www.smh.com.au/

You might not think vending machines would feature in Andrew Harding’s cost cutting drive. But for the Rio iron ore boss, cost-cutting is coming down to micro detail, which can save millions for a business that will ship 340 million tonnes of iron ore this year.

Rio has started putting safety glasses and gloves in a vending machine that requires a staff access card to withdraw them. Previously, the equipment was left in boxes for workers to take, with no way of monitoring use.

“It’s tracking and about feeling accountable for the use of the product,” Mr Harding told Fairfax Media after the miner last week posted a 43 per cent fall in underlying earnings to $US2.9 billion for the June half.

“There is no restriction on them – it’s safety equipment. But instead of someone going ‘this is unlimited, what the hell’ kind of thinking, it reminds people that it’s an important item, contributing to cost reductions. People know that they need to be thoughtful about the use of them, they are not taking more than they need.”

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Brazil the winner from the Andrew Forrest way – by Matthew Stevens (Australian Financial Review – August 10, 2015)

http://www.afr.com/

The only way Australia and its miners would benefit from any form of co-ordinated iron ore production constraint would be if Brazil could be convinced to add its name to our cartel.

But even with Brazil’s unlikely and illegal embrace of a cartel, the net gains for Australia would be marginal and fleeting, says the most authoritative and technical analysis conducted yet on Andrew Forrest’s contention that Australia’s economy is being abused by its biggest iron ore miners, Rio Tinto and BHP Billiton.

Forrest and his company Fortescue continue to rail about planned expansion, under which both their Pilbara competitors will add about 20 million tonnes to production over coming years, while Gina Rinehart introduces another 55 million tonnes to an already bloated global system.

Having initially taken the Forrest bait on the idea of some sort of market review, governments state and federal promptly backed off after some unusually blunt criticism from the likes of BHP boss Andrew Mackenzie.

But that didn’t settle things for good old Brian Fisher. Fisher is the economist who ran the Australian Bureau of Agriculture and Resource Economics during its pomp as government’s commodity industry number cruncher, and now directs his own firm, called BAEconomics.

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Commodities Slump Slams Rio Tinto Earnings – by Rhiannon Hoyle (Wall Street Journal – August 6, 2015)

http://www.wsj.com/

First-half results weighed by one-time items

SYDNEY— Rio Tinto PLC said first-half net profit plunged from a year earlier, as the Anglo-Australian miner grappled with a sharp slump in prices for commodities such as iron ore, coal and copper.

Rio Tinto, the world’s second-largest producer of iron ore behind Brazil’s Vale SA, said it was targeting cost cuts of $1 billion this year compared with an earlier target of $750 million. It also said it would spend less than it had expected on projects, paring its capital-expenditure budget for this year to around $5.5 billion from an earlier forecast of as much as $7 billion.

The resources giant Thursday reported a net profit of $806 million for the six months through June, down from $4.4 billion in the same period a year earlier. That was weighed by noncash exchange-rate and derivative losses of $1.3 billion and impairment charges of $400 million, mainly relating to its stake in Energy Resources of Australia, it said.

Underlying earnings, stripping out one-off charges, were down 43% at $2.92 billion, it said, above the $2.42 billion median of seven analysts’ forecasts compiled by The Wall Street Journal.

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Why Chevron, Adani, Fortescue show commodity mega-projects era is over – by Clyde Russell (Reuters U.S. – August 6, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 6 (Reuters) – Want a snapshot of the problems facing natural resource companies and why the era of big projects is over? Consider the recent dilemmas of Chevron, Adani and Fortescue Metals in Australia.

The first is battling cost overruns and combative unions in trying to get a multi-billion dollar project ready.

The second is facing yet another delay to the world’s biggest coal-mining development, with a court victory by environmentalists adding to financing challenges amid deteriorating economics.

The third is playing coy about a possible rescue by a Chinese white knight, which could help it survive a severe downturn in the price of its product, largely self-inflicted by overly ambitious expansions within the industry.

The three companies have little in common other than they all operate in Australia and face the challenge of trying to successfully run major projects at a time of unrelenting commodity price weakness.

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COLUMN-Iron ore’s “bull market” shows rise of financial trading – by Clyde Russell (Reuters U.S. – August 3, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 3 (Reuters) – One of the more fanciful notions from the recent rally in iron ore prices is that the steel-making ingredient is now back in a bull market.

Asian spot iron ore .IO62-CNI=SI does meet the technical definition of being in a bull market, having gained 25.4 percent between its record low of $44.10 a tonne on July 8 and the close of $55.30 on July 29.

Markets are said to be in a bull phase when the rally exceeds 20 percent, likewise they are in a bear period when the decline is greater than 20 percent.

Traders are more likely to talk about dead cat bounces than bull runs where iron ore is concerned, and the fact remains that despite the price rally, iron ore remains down 25.7 percent so far this year and is barely a quarter of what it was at its all-time high in early 2011.

The recent gain in spot prices is actually the second technical bull market already this year, following the 40 percent jump between the low of $46.70 a tonne on April 2 and the peak of $65.40 on June 11.

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Marketers Use Metal to Talk Tough – by John W. Miller (Wall Street Journal – July 29, 2015)

http://www.wsj.com/

Industries debate elements, but gold standard always changing; tungsten battles titanium

Earlier this year, with the steel and aluminum industries duking it out in the auto industry, General Motors Co. marketed its Sierra truck as made of rolled steel like “the hulls of submarines.”

That raised the eyebrows of at least one metallurgist. “The reason those hulls are so strong is that they’re coated with titanium,” says John Tumazos, a longtime investor in metals companies.

The stone, iron and bronze ages have come and gone. Superman became known as the Man of Steel. Titanium Man was born in the 1960s. A platinum-selling album might inspire your heart of gold to make an ironclad promise. Some metallic words make you sound silver-tongued; others, tin-eared. Titanium trumps tungsten.

Metals and elements permeate language and culture, but the gold standard is constantly changing. These days, the use of metallic adjectives is more popular than ever, as makers of cars and airplanes tinker with alloys to reduce weight and enhance performance.

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