Indian iron-ore miners rush to steelmaking sector – by Ajoy K Das (MiningWeekly.com July 14, 2015)

http://www.miningweekly.com/page/americas-home

KOLKATA (miningweekly.com) – India’s standalone miners have been galvanized to take a slice of the domestic steelmaking pie.

All large government-owned and managed miners with large iron-ore portfolios have been in touch with their respective controlling authorities seeking to spread their strategic investments into steel production, an official in the Ministry of Steel said.

Every iron-ore, manganese and chrome ore miner was scouting for opportunities to invest in large steel mills, based on the perception that the current downturn in global commodity prices could be prolonged, making it an opportune time for capital investments in downstream production and to hedge against margin erosion from just raw material production, he added.

NMDC Limited, the largest domestic iron-ore miner and under administrative control of the Steel Ministry, has sought government approval to participate in the planned special purpose vehicles (SPVs) for construction of mega steel plants across India’s mineral-rich provinces.

The Steel Ministry has already announced the creation of SPVs in Jharkhand, Chhattisgarh, Odisha and Karnataka to put up steel mills that each have a capacity of about 10-million tonnes a year with an investment of $7-billion to $8-billion riding on each.

Read more

Vale’s Cut Is No Panacea for Iron Ore, Morgan Stanley Says – by David Stringer (Bloomberg News – July 13, 2015)

http://www.bloomberg.com/

Iron ore prices trading near the lowest level since at least 2009 will probably remain under pressure and may even extend declines after Brazil’s Vale SA announced changes to production plans, according to Morgan Stanley.

The world’s biggest producer said on Monday that it would cut about 25 million metric tons of higher-cost supply from this month, while sticking to a full-year output target of 340 million tons.

The decisions are a recognition that the market is oversupplied this year and will probably remain in surplus in 2016, according to Executive Director Peter Poppinga.

“This will not lead to higher iron ore prices in the short term — it could even have the opposite effect,” Morgan Stanley analysts wrote in an e-mailed report. The changes by Vale won’t reduce supply, rather they will add more lower-cost material into the export market, the analysts said.

Benchmark prices are mired in a bear market as Vale and its main Australian competitors — Rio Tinto Group and BHP Billiton Ltd. — increase low-cost production even as demand stagnates in China, spurring a glut.

Read more

Iron ore miners unprepared for challenges, warns BHP – by Paul Garvey (The Australian – July 14, 2015)

http://www.theaustralian.com.au/business/

Australia’s iron ore miners are unprepared for the massive exploration challenges ahead of them, BHP Billiton’s head of iron ore exploration has warned.

Speaking at the AusIMM iron ore conference in Perth on yesterday, BHP’s Joe Knight said current exploration methods would be unable to discover and define the quantity of new ore bodies needed to sustain the Pilbara’s soaring iron ore output.

The Pilbara is home to three of the world’s four largest iron ore miners — BHP, Rio Tinto and Fortescue Metals Group — and exports almost 800 million tonnes of ore a year.

That figure is set to grow to about 965 million tonnes a year by 2017, Mr Knight said, based on the current publicly announced plans of the region’s miners and explorers.

At that rate, Mr Knight said, companies would struggle to replace their mined resources unless they evolved their approach to exploration, given the forecast annual production was the equivalent of more than three so-called “tier one” iron ore deposits.

Read more

Vale Rallies Most in Month Amid Iron-Ore Supply Cut Plan – by Juan Pablo Spinetto (Bloomberg News – July 13, 2015)

http://www.bloomberg.com/

Shares of Vale SA, the world’s largest iron-ore miner, rallied the most in a month as the company presses ahead with plans to cut production and boost profit.

Vale will withdraw output of iron ore by 25 million metric tons starting this month, Peter Poppinga, the company’s executive director for ferrous and strategy, said at an industry conference in Sao Paulo.

The cuts will come from its lower-quality products at its mines in south and southeast Brazil and from third-party purchases, he said.

“Our mantra is not volume at any cost anymore, it’s to maximize margins,” Poppinga told reporters at the event. “It doesn’t mean shutting mines, it means optimizing some production flows at plants.”

The Rio de Janeiro-based miner is moving to trim low-quality output as it focuses on boosting profit amid what it sees as an oversupplied market in 2015, and one that will probably be in surplus next year, Poppinga said.

Read more

Swiss Question Witnesses in Guinea in BSG Resources Bribery Probe – by Scott Patterson (Wall Street Journal – July 10, 2015)

http://www.wsj.com/

Investigators are looking into whether Israeli billionaire Beny Steinmetz’s mining arm paid bribes for rights

Swiss investigators said they have questioned several witnesses in the West African nation of Guinea in a broadening criminal probe into whether Israeli billionaire Beny Steinmetz’s mining arm paid bribes for the rights to one of the world’s largest iron-ore deposits.

The investigators, led by Geneva prosecutor Claudio Mascotto, left Guinea Friday after spending the week interviewing former government officials with ties to Guinea’s mining ministry and banking system who were involved in decisions related to the deal, according to people familiar with the investigation. The investigators also met with an attorney representing Mr. Steinmetz, the people said.

The interviews were another indication that individuals tied to BSG Resources Ltd., the mining arm of Mr. Steinmetz’s family-owned conglomerate, remains the focus of multiple investigations into allegations that bribes were paid to win mining rights in Guinea’s Simandou mountain range, where the iron-ore deposits are said to be among the world’s biggest.

Read more

Debt Load Digs Into Mining Industry – by Rhiannon Hoyle (Wall Street Journal – July 12, 2015)

http://www.wsj.com/

Resources firms borrowed heavily to supply China; now boom is ending, prices are down

SYDNEY—When Australia’s richest person, Gina Rinehart, needed cash last year to build a massive iron-ore mine called Roy Hill in northwest Australia, five export-credit agencies and 19 banks teamed up to provide the US$7.2 billion required, sealing the largest project-financing deal in industry history.

The loan deal struck to fund the mine, cut into a vast red plain deep in the Australian Outback, now looks like the high point of a multiyear pileup of debt in the global mining sector.

As forecasts predicting endless growth in China’s appetite for raw materials became a matter of industry faith, mining companies borrowed extensively to build networks of pits, railway lines and port terminals. Megadeals abounded as a merger-and-acquisition frenzy took hold. Cheap borrowing costs, thanks to low global interest rates, fueled the splurge.

Now, as China’s hunger for resources ebbs and mining companies’ profits suffer amid falling commodity prices, those debts have become an albatross around the industry’s neck.

Read more

Shock and ore: What iron ore’s 10% rebound means – by Nyshka Chandran (CNBC.com – July 9, 2015)

http://www.cnbc.com/

Iron ore’s near 10 percent rebound on Thursday following a horror streak this week left strategists debating whether more pain is in store for the beleaguered commodity.

Benchmark ore for delivery to the Chinese port of Tianjin ended a ten-day rout overnight, rising to $48.30 a ton, a 9.5 percent increase from an all-time record low of $44.10 hit in the previous session.

Major banks like Citigroup remain bearish, predicting prices to fall below $40 a ton this year due to the commodity’s fundamental oversupply. HSBC meanwhile expects prices to trade around $45 during the third quarter. “We expect the market to go into oversupply and shake out mode again,” it said in a report this week.

But some analysts are optimistic.

“A near 10 percent bounce suggests people will think iron ore is now relatively cheap. A market that breaks to new lows and stays low is very weak, but to see such a bounce suggests there’s more comfort.

Read more

Iron ore miners brace for more volatility – by Paul Garvey (The Australian – July 10, 2015)

http://www.theaustralian.com.au/business

A head-spinning 24 hours in iron ore may only be the start, with investors warned to expect more volatility in the market for Australia’s biggest export.

An early morning panic in response to an unprecedented plunge in the iron ore price yesterday transformed into a surprise rally for Australian iron ore miners as Chinese markets rebounded.

Yesterday had been shaping up as a bloody day for Australia’s iron ore sector following an 11 per cent plunge in the spot iron ore price to just $US44.10 a tonne. Both the closing price and the scale of the fall were the worst seen since the introduction of spot prices in 2009.

But a rally in Chinese markets and a rise in iron ore futures helped Australia’s miners not only recover early losses but, in many cases, close the day higher.

Fortescue Metals Group, having hit a six-year low earlier this week, was the biggest winner with a 6.6 per cent jump to $1.785.

Read more

BHP Billiton and Rio Tinto ready for iron ore’s ‘new normal’ – by Amanda Saunders and Tess Ingram (Australian Finacial Review – July 9, 2015)

http://www.afr.com/

Australia’s big two iron ore miners, Rio Tinto and BHP Billiton, believe the commodity will continue to be a “wealth generation machine for Australia” and expect volatility to recede, despite the heavy price falls in recent days.

Iron ore may be headed for $US40 a tonne after crashing through $US45 on Wednesday night, dropping more than 10 per cent in a single day. But Rio and BHP say they are well prepared for the possible new normal in prices.

Rio Tinto iron ore boss Andrew Harding told The Australian Financial Review that the iron ore price “is moving around its long-term average after coming off an unprecedented high that was never sustainable”. “We are seeing a pattern play out now that is entirely consistent with the history of all internationally traded commodities,” he said.

OPTIMISM LONG-TERM

The miner has cut costs, and prepared its iron ore division “to manage these fluctuations over the long term”. He maintains that the “long-term picture for iron ore remains sound”, and the commodity will “continue to be a wealth generation machine for Australia”.

Read more

Iron ore tumbles amid China contagion – by Neil Hume (Financial Times – July 8, 2015)

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

Iron ore, the key ingredient in steelmaking, suffered its biggest one-day fall since records began, dropping by more than 11 per cent to a seven-year low as worries about the Chinese economy continued to mount.

Ore with 62 per cent iron content for immediate delivery to China dropped $5.60 to $44.10 a tonne, according to an assessment from The Steel Index.

That was the biggest one-day percentage drop since TSI begun compiling records for physical iron ore transactions in 2008. Iron is critical to the profitability of several major mining companies such as Anglo American, BHP Billiton, Rio Tinto and Vale.

They have spent billions of dollars expanding their operations to meet expected demand from China but, if the iron ore price were to stay at the current level sustained period of time, it would call into question the ability of miners to fulfil promises of higher return for shareholders.

Over the past year iron ore has dropped almost 55 per cent as a tsunami of new supply has overwhelmed demand.

Read more

COLUMN-Miners paint rosy iron ore picture by skirting tough issues – by Clyde Russell (Reuters U.S. – July 8, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, July 8 (Reuters) – Australia’s major iron ore miners have had a torrid year so far, battling low prices, engaging in an ugly slanging match with each other and dealing with persistent questions about the wisdom of their expansion strategies.

It was therefore not surprising when the mining industry’s peak body launched a report on Tuesday that puts quite a different spin on the iron ore industry.

The Minerals Council of Australia’s report, entitled “Iron Ore: The Bigger Picture”, points out the enormous benefits the industry has brought Australia and will continue to provide.

The major Australian iron ore miners, Rio Tinto and BHP Billiton, are members of the council and sit on the board of directors, but the country’s third-biggest producer, Fortescue Metals Group, is absent from the list.

The report doesn’t really make an effort to explain how the major miners got their forecasts on Chinese demand so wrong, and it glosses over whether they really expected the price to fall as low as it has.

Read more

Iron Ore’s Bear Market May Deepen as Clarksons Forecasts $40 – by Jasmine NgDavid Stringer(Bloomberg News – July 7, 2015)

http://www.bloomberg.com/

Iron ore will probably extend declines after falling back into a bear market on Monday as low-cost supplies from Australia and Brazil are set to expand further this half while demand stumbles in China.

Prices may drop toward $40 a metric ton, according to Clarksons Platou Securities Inc. A deepening slowdown in China’s steel industry and higher iron ore exports from the largest miners are weighing on prices, said Sanford C. Bernstein & Co.

Iron ore’s return to a bear market highlights that the same factors of surging supply and stalling demand growth, which dragged prices to a decade-low early April, remain at the forefront. Recent losses followed figures showing inventories in China rebounded, while exports in June from Australia’s Port Hedland were at a record. The Minerals Council of Australia on Tuesday defended local miners’ policy of adding output, saying cuts would be a failed strategy that would aid competitors.

“Momentum is clearly negative and that is going to be hard to reverse in the immediate short term,” Paul Gait, an analyst at Bernstein in London, said in an e-mailed response to questions. “The revealed preference of the miners is for volume over value, for tons ahead of price.”

Read more

A forest of inconvenient truths on iron ore – by Matthew Stevens (Australian Financial Review – July 6, 2015)

http://www.afr.com/

Andrew Forrest may not like the idea much but there is a good chance that Australian iron ore will generate more national income over the next decade than it did through the 10 years of boom times that came so suddenly to a halt last November.

A report prepared for the Minerals Council of Australia (or Rio Tinto) by Port Jackson Partners predicts that the Pilbara’s powerful iron ore troika along with a subset of much smaller producers will sell $615 billion of iron ore between now and 2025.

That is 40 per cent more than the $430 billion of revenue that those same producers generated through 2005-14, the decade that was punctuated by peak iron ore pricing.

“Australia now has a 50 per cent share of the seaborne market, a share built on vastly expanded production volumes, which now exceed 650 million tonnes per year. This compares with 170 million tonnes in 2000. This will enable the industry to add more value to the Australian economy over the next decade than over the previous 10 years,” PJP predicts.

Read more

Iron Ore’s Recovery Turns to Rust – by Abheek Bhattacharya (Wall Street Journal – July 3, 2015)

http://www.wsj.com/

Mining firms looking to cash in on higher iron-ore prices are the same ones causing the steelmaking commodity’s downfall

The iron-ore market is discovering why the archenemy of high commodity prices is, well, high commodity prices.

The benchmark price of iron ore has fallen 15% in the past three weeks after hitting its highest level since January, which in turn has sent shares of Australia’s pure iron-ore producer Fortescue Metals tumbling 27%. Signals of high shipments from Australia and poor steel appetite from China suddenly reminded traders of the gulf that exists between supply and demand in this steelmaking ingredient.

Between April and mid-June, traders had pushed up prices nearly 40% because they thought that gulf was closing. One reason: many iron-ore mines were shutting down. Midsize Australian producer Atlas Iron closed its operations while China closed high-cost mines.

But as prices ticked up, Atlas slowly restarted mines, the latest one this week. That amounts to an extra 10 million tons or 1% of supply. China has brought back over 20 million tons, notes Citigroup’s Ivan Szpakowski. There is also the prospect of new supply from Australian mines later this year.

Read more

REFILE-Iron ore price fall a sign China’s economic might waning – by James Regan and Ruby Lian (Reuters U.S. – July 3, 2015)

http://www.reuters.com/

SYDNEY/SHANGHAI, July 3 (Reuters) – Iron ore prices dropped to the lowest in more than two months on Friday, sending shivers through the mining industry and heightening worries that Chinese economic activity is slowing just as ore piles up at its ports.

China uses more than a billion tonnes of iron ore a year to make steel – 14 times the consumption of the United States – but Beijing’s efforts to shift the economy to consumer-led growth means steel consumption is peaking faster than expected.

“It’s clear China can no longer consume all the iron ore that’s out there, so something’s got to give,” said James Wilson, a sector analyst for Morgans Financial in Perth.

Shares in Australia’s biggest mining houses, including Rio Tinto , BHP Billiton and Fortescue Metals Group led the Australian bourse lower after the price of the raw material fell by 5 percent.

Read more