Iron Ore – Page 78 – Republic of Mining

UPDATE 1-Apart from Big 3, iron ore miners face ‘existential’ threat – Goldman – by Manolo Serapio Jr (Reuters U.S. – April 16, 2015)

April 16, 2015

http://www.reuters.com/

SINGAPORE, April 16 (Reuters) – Up to half of iron ore output by miners outside the three mega producers in Australia and Brazil is at risk of closure with global demand set to peak at about 1.4 billion tonnes next year, Goldman Sachs said.

Production volumes among top miners – Vale, Rio Tinto and BHP Billiton – was not at risk, the bank said. “However, the rest of the industry is now facing an existential challenge,” Goldman analysts Christian Lelong and Amber Cai said in a report.

“We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in domestic steel consumption,” they said.

Separately, Moody’s Investors Service said supply reductions were dwarfed by planned increases estimated to exceed 300 million tonnes over the next several years.

Goldman cut its 2015 iron ore price estimate by 18 percent to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018, down 29-33 percent from previous estimates. The price could drop to $40 this year and next, based on Moody’s estimates.

Citi analysts call the ‘end of the Iron Age’ – by Matt Clinch (CNBC.com – April 13, 2015)

April 14, 2015

http://www.cnbc.com/

Oversupply and a lack of demand growth has led some market analysts to speculate that iron ore prices will never recover to former levels, and warn of a divergence in different base metals going forward.

The price of iron ore is now just over $47 a ton, according to The Steel Index (TSI), which measures a benchmark of 62-percent ore. This is its lowest level since the TSI started compiling spot market prices in 2008, according to Reuters.

On Monday, analysts at Citi slashed their forecasts for the price of the metal and now expect iron ore to average $45 a ton in 2015 and $40 a ton in 2016. These are downgrades of 23 percent and 36.6 percent, respectively.

“We believe the upside in the sector is now capped, however the downside is being protected by dividend yield. We think it is going to be a tough 1-2 years for the mining sector until we clear surplus capacity in the bulk commodity prices,” Heath Jansen, metals and mining analyst at Citi, said in a note Monday morning.

Another analyst, Colin Hamilton, head of global commodities research at Macquarie, explained that iron prices needed to fall in lower in the short term to clear an oversupply that isn’t prevalent in other commodity markets.

Analysis: Booming economy can’t help iron ore, steel – by John Myers (Duluth News Tribune – April 5, 2015)

April 13, 2015

http://www.duluthnewstribune.com/

When Minnesota Lt. Gov. Tina Smith met with some of the hundreds of Iron Range Steelworkers who received layoff notices last week, she said the stress was evident on their faces.

“The older ones, who have been through this cycle before, really had this look of fatigue, like ‘here we go again,’ ” Smith told the News Tribune. “With some of the younger ones, there was more fear. We’re telling them we’re going to bring everything we can to help them. But mostly there’s just so much uncertainty. No one knows how long this is going to last.”

Those in attendance were among nearly 1,200 taconite industry workers who will be out of a job by June. Minnesota’s Iron Range and its mining industry are facing the most layoffs they’ve seen since 2009 thanks to an industry-crippling international trade problem that seems to be getting worse.

The prices of both finished steel and its main raw material, iron ore, are in a free fall thanks to a huge global oversupply. Similar Iron Range downturns in the early 1980s, in 2000-01 and again in 2009 all came as part of national and even global recessions.

Nunavut regulatory org says no to Baffinland – by Lisa Gregoire (Nunatsiaq News – April 9, 2015)

April 10, 2015

http://www.nunatsiaqonline.ca/

Expanded shipping, and ice-breaking, contravenes land use plan: NPC

The Nunavut Planning Commission has chosen to protect Arctic ice — and all it delivers and represents to the people and animals of Nunavut — over industrial development.

In a bold move announced April 8 that will impact how Baffinland Iron Mines Corp. operates its Mary River iron mine in north Baffin, NPC directors have decided unanimously that the mining company’s amended project proposal does not conform to the North Baffin Regional Land Use Plan (NBRLUP).

This is the first time the NPC has ever issued a non-conformity decision. “Ice is an essential part of life in the North. For people, for polar bears, for seals and other animals in the North, ice is a bridge — both metaphorically to the past and present Inuit values and activities, also actually as a fact,” their decision states.

“Ice physically links Inuit to their culture and values.” While commissioners also recognize the need to balance “other modern economic values and development,” it nonetheless decided that Baffinland’s new plan, to break ice and ship ore from Milne Inlet nearly year-round, is incompatible with land use regulations.

Labrador West dealt another blow as IOC announces 150 layoffs (CBC News Newfoundland – April 09, 2015)

April 10, 2015

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

Labrador West has been dealt another significant economic blow, with 150 layoff notices going out Thursday to unionized workers with the Iron Ore Company of Canada.

The workers are members of Local 5795 of the United Steelworkers, which represents some 1,400 people at the operation, said president Ron Thomas.

The layoffs come amid a significant drop in commodity prices, and many were expecting cost-cutting measures from the mining giant. IOC is majority owned by Rio Tinto, and employs roughly 2,500 people in Labrador West and Sept-Îles, Que. Labrador City Mayor Karen Oldford said it was a “sad day” for the community, but the number was roughly what the town expected if there were going to be layoffs.

“All we can do is try to work with the families that are going to be affected and hope that the commodity prices will turn around quickly, just as quickly as they went down, in order to try to get people back to work,” she said.

Earlier efforts by the company to cut costs at Labrador City failed, with the union overwhelmingly rejecting a proposed wage freeze in February. There was also very little participation in early retirement incentives.

Iron-Ore’s Collapse Claims Major Australian Casualty – by Rhiannon Hoyle (Wall Street Journal – April 10, 2015)

April 10, 2015

http://www.wsj.com/

Mid-sized miner Atlas Iron floored by iron-ore prices’ fall to lowest levels in a decade

SYDNEY—The sharp fall in iron-ore prices claimed a major casualty in Australia when Atlas Iron Ltd. said it would shutter all its mines and halt exports to Asia.

Atlas was worth nearly 4 billion Australian dollars (US$3.1 billion) as recently as 2011 but has been losing money rapidly as iron-ore prices fell 30% since the start of this year to a decade-low. That raised concerns about its ability to repay debts if it continued digging up ore.

The Perth-based company joins a raft of small- and mid-sized iron-ore producers squeezed by the rapid decline in spot prices. Australian steelmaker Arrium Ltd. has been forced to shutter one of its two iron-ore mines here, while Cliffs Natural Resources Inc. recently suspended a mine in Canada. Cliffs has been restructuring its U.S. business to focus on domestic iron-ore sales rather than competing in the seaborne market.

Even major producers such as Rio Tinto PLC have been slashing costs and jobs as they grapple with the deepening market downturn.

Fortescue Metals Group Ltd., the world’s fourth-largest iron-ore exporter, was last month forced to scrap a planned debt sale because it couldn’t agree on terms with investors amid a sour outlook for the commodity.

Iron ore in fresh crisis as forward prices crumble – by Henning Gloystein and Manolo Serapio Jr. (Reuters India – April 10, 2015)

April 9, 2015

http://in.reuters.com/

SINGAPORE – (Reuters) – Iron ore is veering to a new crisis as prices for future delivery of the commodity slide 30 percent in the space of a month, and its outlook is now more bearish than oil and more dire than ever for miners struggling to just stay in business.

Prices of the steel-making ingredient for immediate delivery have slumped 60 percent over the past year as demand particularly from China slowed rapidly.

Despite the crumbling cash market, miners had been able to hedge future production at prices well above spot levels. Indeed, a month ago, miners could still sell 2017 output at close to $70 a tonne even as April 2015 prices fell below $60 for the first time in more than five years.

Forward iron ore prices have since tumbled below $47 for deliveries all the way until the end of 2017, depriving nearly all miners of any chance of establishing hedges at or above breakeven levels during that period.

A combination of factors brought about the recent capitulation in forward prices, most notably news that China plans to subsidise its iron ore sector to protect its flagging steel industry. Subsidies would help keep mines open and keep supplies flowing.

Australia’s Hockey vs Glencore’s Glasenberg – by Kip Keen (Mineweb.com – April 9, 2015)

April 9, 2015

http://www.mineweb.com/

Treasurer’s tough comments on Glencore-Rio Tinto merger could be read as a stern warning by Australia’s government.

Taken at face value Australia’s treasurer Joe Hockey has declared Rio Tinto untouchable. As widely reported now by media, Hockey is quoted as saying by numerous sources at a recent meeting including mining executives that there was “no way” he’d let Glencore merge with Rio Tinto “on his watch”. Assuming the reports are accurate, the question becomes, is Hockey serious?

If he is, then Australia truly has a curious way of dealing with possible foreign takeovers. Yes, it’s ultimately up to the treasurer (a political position equivalent to finance minister in other parliaments) to decide on big deals like this where the “national interest”, e.g. major tax revenue, is at stake.

But then the decision is usually taken as part of, or at least after, some due diligence. Australia’s Foreign Investment Review Board (FIRB) usually makes unbinding recommendations on such deals to the treasurer. Then the treasurer decides, however he/she and his/her government want.

Now, if Hockey truly means “no way” on another (hypothetical) attempt by Glencore to merge with Rio Tinto, he would effectively be turning the whole process on its head.

Gina Rinehart’s Roy Hill mine not relying on China – by David Stringer (Sydney Morning Herald – April 9, 2015)

April 8, 2015

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

Asia-Pacific’s richest woman is gearing up to start shipments from her $10 billion iron ore project in Australia. Even with prices at 10-year lows, she’s displaying no lack of confidence in the mine’s success.

Billionaire Gina Rinehart’s ace? Her mine isn’t relying solely on sales to China, the biggest iron ore buyer. This limits the project’s exposure to a market where steel demand is judged to be peaking. Instead, she’s locked in supply contracts with three of the largest iron ore consuming Asian nations outside of China.

“They feel very confident. Roy Hill has a massive advantage in that it has diversified its markets,” Philip Kirchlechner, Perth-based director of Iron Ore Research Pty. said by phone. “They have buyers from three of the other major iron ore importing markets.”

Roy Hill, Australia’s largest single iron ore mine, is on track to commence exports from September, adding 55 million tons a year of output to a market already saturated by a growing surplus. It’s even accelerating the mine’s schedule, seeking to hit its planned capacity at the fastest pace of any project built in Western Australia’s iron-rich Pilbara region.

Cliffs to put mines, rails, ports up for sale in Quebec, N.L. (CBC News Business – April 7, 2015)

April 8, 2015

http://www.cbc.ca/news/business

Mine company under bankruptcy court protection as it completes its exit from Eastern Canada

The Canadian Press – Idled Quebec iron ore mines, railways and port facilities, are about to be put up for sale as part of a court-supervised exit from eastern Canada by Cliffs Natural Resources.

The Cleveland-based mining company’s subsidiaries, which filed for creditor protection in January, are seeking a Quebec court’s permission to solicit interest next month in the Bloom Lake mine, the Wabush Mine, and related port and rail assets in Quebec and Labrador, according to a motion filed by monitor FTI Consulting Canada.

Bloom Lake General Partner Ltd. and affiliates such as Cliffs Quebec Iron Mining filed for protection under the Companies’ Creditors Arrangement Act amid falling iron ore prices.

Excluded from the sale process are Cliffs’ chromite assets in Ontario’s Ring of Fire that are in the process of being sold to Noront Resources for $20 million US.

Steel ‘dumping’ blamed for Iron Range layoffs – Jon Collins (Minnesota Public Radio – April 1, 2015)

April 8, 2015

http://www.mprnews.org/

Politicians and mining company officials are blaming unfair foreign competition for more than a thousand recent layoffs in the state’s iron ore industry.

U.S. Steel announced Tuesday that it would idle part of its taconite plant in Mountain Iron, Minn., starting on June 1. Earlier last month U.S. Steel announced plans to idle a plant in Keewatin, which will result in more than 400 layoffs. Magnetation also recently announced that it was closing an Iron Range plant and laying off more than 40 people.

The closing of plants and mills comes from a glut of steel supplies and the steady decline of prices over the last few months.

Following news of the most recent plant closing, Rep. Jason Metsa, DFL-Virginia, blamed the low prices on “foreign countries for dumping state-sibsidized steel on American shores.” U.S. Steel officials have also pointed to illegal trade practices by Chinese companies.

Dumping is a frowned upon international trade practice, said Tony Barrett, a professor of economics at the College of St. Scholastica. It’s when a company sells steel abroad for cheaper than the cost to produce it because they don’t need to make the same level of profits as American steel companies.

Tax office pursues BHP Billiton and Rio Tinto over Singapore tax shelter – by Neil Chenoweth (Australian Financial Review – April 6, 2015)

April 7, 2015

http://www.afr.com/

Mining giants BHP Billiton and Rio Tinto are being pursued by the Australian Taxation Office for channelling billions of dollars in profits from iron ore sales through companies that pay almost no tax in Singapore.

While BHP Billiton and Rio TInto are Australia’s largest taxpayers, The Australian Financial Review has obtained documents that show the two mining companies report $2.6 billion a year in profits in their Singapore marketing hubs where they pay tax rates as low as 2.5 per cent.

The arrangements save the two companies more than $750 million a year in Australian tax and the ATO regards it as tax avoidance under the transfer pricing rules. The ATO is pursuing multibillion-dollar claims against each company, says a source with direct knowledge of the disputes.

The exact amounts of the potential tax bills are unclear and both companies have fought the ATO for years and argue their Singapore operations were not set up to reduce tax.

With scores of Australian companies rushing to open their own Singapore operations, the BHP Billiton and Rio Tinto cases shape as key precedents for the ATO, which has been warning of compliance problems with marketing hubs since 2010.

As iron ore slides, China buyers inflict more pain on small miners – by Manolo Serapio Jr (Reuters U.S. – April 7, 2015)

April 7, 2015

http://www.reuters.com/

SINGAPORE, April 7 (Reuters) – Chinese steelmakers are unwittingly helping the world’s biggest iron ore miners tighten their grip on global production by demanding to pay for shipments of the raw material based closely on depressed spot prices.

The three largest and most profitable iron ore producers – Australia’s Rio Tinto and BHP Billiton, along with Brazil’s Vale – have been happy to sell at or near spot despite plunging iron ore prices, while their smaller rivals struggle to make money.

Smaller producers, including some higher cost Australian miners, want to continue with deals based on longer-term averages of prices, looking to hedge against further falls in the market.

But buyers in the world’s largest consumer of iron ore are having none of it, with many Chinese mills demanding cargoes priced as close as possible to their delivery date.

“Pricing moves around with the steel mills. It used to be all based on a monthly average. Now you find the steel mills and traders perhaps trying to anticipate low points and suggesting quotation periods of maybe two weeks,” said Morgan Ball, chief executive of Australian iron ore miner BC Iron Ltd.

Mining stocks hit as iron ore price slump continues – by Sarah-Jane Tasker and Matt Chambers (The Australian – April 1, 2015)

April 1, 2015

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

Australia’s iron ore miners continue to feel the pain of the brutal slump in the price of the commodity, with falls on the local market in early trading.

As the price of iron ore sits on the cusp of falling below $US50 a tonne, Fortescue Metals Group lost almost 2 per cent of its value after the market opened to sit at $1.92, while Atlas Iron’s stock was off 3.85 per cent at 12.5c.

BHP Billiton, the world’s largest miner, was 1.7 per cent lower this morning at $30.50, while its main rival, Rio Tinto, was off 1.28 per cent at $56.60.

Overnight, Chinese iron ore prices monitored by The Steel Index fell $US1.90, or 3.6 per cent, to $US51 a tonne, representing a record low since the index starting monitoring prices.

When current freight prices of about $US4.50 a tonne are removed, it is the lowest price Australian iron ore has been sold at since March 2006, when prices were still negotiated annually. The price could face a fresh round of negative news today, with China’s official manufacturing index data due.

U.S. Steel to idle some production at Minntac, affecting hundreds of workers – by John Myers (Duluth News Tribune – March 31, 2015)

April 1, 2015

http://www.duluthnewstribune.com/

The string of bad economic news on the Iron Range compounded Tuesday when U.S. Steel announced that it will dramatically slow production at its Minntac taconite facility in Mountain Iron starting June 1.

Local union officials said the move will put 700 Steelworkers off the job, nearly half of the nearly 1,500 people who work at Minnesota’s largest taconite mine and processing plant.

The Pittsburgh-based steel giant said the move was forced by an oversupply of iron ore due to continued low demand for its American-made steel — a problem made critical in recent weeks by the ongoing flood of foreign steel made with cheap foreign iron ore.

“Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact,” the company said in a brief statement Tuesday.

State Rep. Jason Metsa, DFL-Virginia, said he’s been told that three of the plant’s five production lines will be shut down in an effort to reduce a backlog of 3.2 million tons of taconite. Union officials said they had not yet been told which employees will be laid off.