Tag Archives: Iron Ore

Iron Ore Rings In 2016 as Holdings Swell at China’s Ports, by Jasmine Ng

No, things are not getting better, and they’re going to get a whole lot worse. From Jasmine Ng at bloomberg.com:

Holdings at ports may top 100 million tons in 2016, Maike says
Reserves increase for fourth straight month as supply rises

Iron ore stockpiles at ports in China are heading into 2016 at the highest level in more than seven months as expanding low-cost supplies and sputtering demand in the biggest buyer spur concern that a glut will persist, hurting prices.

“Stockpiles have been on the rise because domestic demand is getting weaker and shipments from the major producers have increased,” Dang Man, an analyst at Maike Futures Co. in Xi’an, said by phone on Monday. Mills have “been cutting production, which reduces demand for iron ore. So a lot of the stocks have remained at ports.”

Holdings rose 0.8 percent to 93.1 million metric tons last week in the final reading of 2015, according to Shanghai Steelhome Information Technology Co. The inventories are at the highest since May after expanding for four months.

Iron ore breached $40 a ton this month, hurt by surging low-cost supply from producers including BHP Billiton Ltd., Rio Tinto Group and Vale SA, weaker consumption and rising stockpiles. Mills in the country that supplies half the world’s steel reined in output as product prices sank and the onset of winter curbed demand already hurt by a cooling economy. Port holdings expanded 13 percent this quarter, the biggest gain since the first three months of 2014.

Back Above

“Inventories will continue to rise in 2016,” Dang said, forecasting that the holdings will probably climb back above 100 million tons. It won’t be a continuous increase because some high-cost mines will halt shipments, but the rising trend will persist, she said.

Iron ore has lost 27 percent this quarter and prices are set to cap a third annual decline, according to Metal Bulletin Ltd. Ore with 62 percent content delivered to Qingdao — which bottomed at $38.30 a dry ton this month, a record in daily price data dating back to May 2009 — was at $41 on Thursday.

To continue reading: Iron Ore Holdings Swell at China’s Ports

Biggest U.S. Iron Ore Producer Says Rio, BHP in ‘Imaginary World’ by Jasmine Ng

The situation in iron ore looks just like the situation in oil and a lot of other commodities: continued production in the face of massive gluts and declining prices. From Jasmine Ng at bloomberg.com:

Biggest Australia miners won’t change behavior, Goncalves says

`Prices below $50 are not comfortable to anyone,’ CEO says

The biggest iron ore producer in the U.S. says its larger rivals in Australia are hurting themselves as well as their competitors as they ramp-up production in an oversupplied market.

With iron ore slumping to less than $50 a metric ton, revenues at the biggest miners are shrinking faster than costs, according to the head of Cliffs Natural Resources Inc., who said the majors’ expectations that rivals will quit the market aren’t being fully realized.

“Prices below $50 are not comfortable to anyone, including the majors,” Chief Executive Officer Lourenco Goncalves said in a phone interview from the company’s headquarters in Cleveland, Ohio on Tuesday. “The cost-cutting is not even close to offset their loss in revenues. My entire point: the loss in revenue, totally avoidable. Self-imposed. Self-inflicted.”

BHP Billiton Ltd. spokeswoman Emily Perry said on Wednesday the company wouldn’t respond to Goncalves’s remarks, while Rio Tinto Group sent comments from Brendan Pearson, head of the Minerals Council of Australia, which represents miners. There is open competition in the iron ore market and the Cliffs’ CEO shouldn’t be taken seriously, Pearson said.

Raising Output

Iron ore sank below $50 last week on expanded low-cost production from Rio, BHP Billiton and Brazil’s Vale SA, coupled with signs demand in China is contracting. The biggest producers are raising output as prices sag, betting that they can pare costs per ton and boost market share while less efficient miners face closure. Iron ore will decline gradually for years to come, Alan Chirgwin, BHP’s vice president of marketing for iron ore, has forecast.

Goncalves took the helm at Cliffs in 2014 after an activist-investor revolt, promising to end the company’s vulnerability to the oversupplied seaborne market. Shares in Cliffs have fallen 73 percent in the past 12 months as iron and steel prices have tumbled. Last year, Cliffs produced about 34 million metric tons of iron ore from mines in the U.S. and Asia-Pacific. Rio produced 295.4 million tons in 2014, filings show.

“In their imaginary world, 60 million tons of capacity will go offline this year, then another 125 million tons of capacity will go out of commission next year,” Goncalves said. “That’s not the case. Everyone is driving down costs, everyone is trying to continue to cope. You’re not seeing any meaningful number of tons going offline.”

To continue reading: Biggest U.S. Iron Ore Producer Says Rio, BHP in ‘Imaginary World’

Iron Ore Is Buckling Again as Supply Jumps, China Demand Sags, by Jasmine Ng

Stock markets don’t want to notice articles like this. Ignorance is bliss, we suppose. Notice that although prices are dropping, the big 3 iron ore producers are increasing production. That’s ominous, and its going on with other natural resources, notably oil. From Jasmine Ng at bloomberg.com:

BHP, Rio and Vale all post increases in quarterly production

Demand from China `remains tepid,’ MineLife’s Wendt says

Iron ore is showing signs of buckling again. Prices slumped to the lowest level in three months as the top producers announced increases in low-cost supply while data and comments from China pointed to further weakness in demand.

“All of this extra production out of ‘the big three’ will keep a lid on prices,” said Gavin Wendt, founding director and senior resource analyst at MineLife Pty Ltd. in Sydney. “China demand remains tepid and its steel industry is hurting under margin pressures.”

Iron ore is headed for a third year of losses, and the recent decline risks tugging prices below the trading range of $50 to $60 a metric ton that’s held since July, according to Westpac Banking Corp. Rio Tinto Group, BHP Billiton Ltd. and Vale SA, the three largest suppliers, all announced increases in quarterly output this month. China’s central bank on Friday cut benchmark rates and banks’ reserve requirements to boost a faltering economy after data this week showed crude-steel output contracted. The chairman of the second-largest producer flagged the potential for the country’s production to eventually slump 20 percent.

Weak Steel

“The downtrend in seaborne iron ore prices is accelerating,” according to a report from Australia & New Zealand Banking Group Ltd. on Friday. “Chinese steel mills are tightening their spending on the back of weak steel prices.”

Ore with 62 percent content delivered to Qingdao slid 1.1 percent to $51.62 a dry ton on Friday, dropping for a fifth day to the lowest since July 24, according to Metal Bulletin Ltd. Prices are 4 percent lower this week, having dropped for five of the past six weeks. The raw material bottomed at $44.59 on July 8, a record in daily price data dating back to May 2009.

BHP, the world’s biggest miner, said on Wednesday iron ore output jumped 7 percent to 61.3 million tons in the three months to Sept. 30, two days after Brazil’s Vale said it produced a record 88.2 million tons in the period. In mid-October, Rio reported third-quarter output rose 12 percent.

Vale reported a 15 percent drop in adjusted quarterly earnings before interest, taxes, depreciation and amortization on Thursday as slumping prices overshadowed efforts to focus on higher-quality deposits and cut costs. Prices for iron ore fell in line with lower global steel output, with China’s steel usage subdued by real-estate weakness, Vale said.

To continue reading: Iron Ore Is Buckling Again as Supply Jumps

Australia’s Bad Bet on China, by Lindsay David

This article is released in conjunction with “Crisis Progress Report (6): Prophets Without Honor,” SLL, 4/29/15. From Lindsay David, via wolfstreet.com:

Wolf here: After any bubble, it’s always: “Nobody predicted the crash….” Central bankers don’t see bubbles. They’re not allowed to. At least officially, they don’t see them. And thus they can’t see the implosions coming. They can’t officially see these things because they help create them with their monetary policies.

Industry insiders and their financiers don’t see bubbles either because they get rich off them. Politicians and bureaucrats don’t see them because bubbles make them look good and bring in a lot of moolah.

But people do see the bubbles – which are huge and easy to see – and they do predict their crashes though they might not always get the timing right. Yet, they’re pushed aside and made the most unpopular folks around, and they’re expelled from the herd, and their warnings are ignored. It happens every time. And it happened during the Australian iron-ore bubble, whose spectacular crash suddenly “nobody was predicting.” Ha! Here’s Lindsay David:

By Lindsay David, Australia, author of Print: The Central Bankers Bubble, founder of LF Economics:

Late last week Bloomberg’s James Paton released an article titled, Gina Rinehart says ‘nobody was predicting the ore price crash’

Rinehart, “Australia’s richest woman” and “chairman of Hancock Prospecting,” as the article put it, is not the only mining head, politician, treasury employee, mainstream economist, or Reserve Banker “not” to predict the ore price crash. In fact, unless I am seriously mistaken, none of them saw the price crash coming. But they have indeed ignored all the warnings by those who did predict the crash in the spot price of iron ore.

As a clear example:

It’s no secret that back in early 2014, I made the prediction that the spot price of iron ore would breach below $20 per metric ton before the end of 2017. At the time, it was trading above $120 per mt. It’s currently trading at below $58 per mt. And in my opinion, this prediction is on track to eventually becoming a reality.

http://wolfstreet.com/2015/04/26/lindsay-david-australias-bet-on-china-iron-ore-crash-prediction-ignored-warnings/

To continue reading: Australia’s Bad Bet on China