Monday, 28 Nov 2011
World No 2 iron ore miner Rio Tinto's customers are increasingly pushing for shorter term pricing of iron ore in what has been a volatile market, its iron ore chief said on Monday.
The company said it is on track to produce 240 million tonnes a year of iron ore for calendar 2011.
(Sourced fro Reuters)
Showing posts with label short term trend. Show all posts
Showing posts with label short term trend. Show all posts
Monday, November 28, 2011
Tuesday, November 8, 2011
Iron ore price negotiations - Shorter contracts may affect miners
Tuesday, 08 Nov 2011
Iron ore prices have been sliding in the spot market over the past few months as a result of weak demand. In response to this, industrial customers for iron ore are asking for shorter iron ore shipment contracts that are priced closer to the spot market prices.
Historically, iron ore prices have been relatively stable and most contracts have been annual contracts that were generally priced based on the average spot price in the previous year. However, in order to take advantage of the sharp increase in iron ore prices in the past few years, miners decided to move to a quarterly contract system, whereby the contracts would be priced based on the average price in the preceding quarter. Moving to a quarterly contract system helped the companies’ margins when raw material prices went up.
However, in the past few months, the trend has reversed and iron ore prices are slipping due to a fall in the demand. Steel manufacturers, the largest consumers of iron ore, have started to demand even shorter-term contracts, with some Chinese buyers entering into monthly contracts.
The slowing economic growth in China has been a primary driver of the decline in iron ore prices. Rio’s contracts are priced an estimated 23% higher than the prevailing spot market price, and 86% of the company’s contracts are priced quarterly. Should the company begin offering monthly contracts to gain higher volume, margins would likely take a big hit. We see iron ore becoming an over-supplied commodity in the near-term as Chinese iron ore production rises over the next few years.
Miners also differ in their take on these new contract requests BHP Billiton is already selling majority of its Iron Ore on monthly contracts, while Vale sees no need to move away from quarterly contracts. Rio Tinto currently enjoys a healthy margin from iron ore sales, but we expect that to decline going forward.
(sourced SeekingAlpha)
Iron ore prices have been sliding in the spot market over the past few months as a result of weak demand. In response to this, industrial customers for iron ore are asking for shorter iron ore shipment contracts that are priced closer to the spot market prices.
Historically, iron ore prices have been relatively stable and most contracts have been annual contracts that were generally priced based on the average spot price in the previous year. However, in order to take advantage of the sharp increase in iron ore prices in the past few years, miners decided to move to a quarterly contract system, whereby the contracts would be priced based on the average price in the preceding quarter. Moving to a quarterly contract system helped the companies’ margins when raw material prices went up.
However, in the past few months, the trend has reversed and iron ore prices are slipping due to a fall in the demand. Steel manufacturers, the largest consumers of iron ore, have started to demand even shorter-term contracts, with some Chinese buyers entering into monthly contracts.
The slowing economic growth in China has been a primary driver of the decline in iron ore prices. Rio’s contracts are priced an estimated 23% higher than the prevailing spot market price, and 86% of the company’s contracts are priced quarterly. Should the company begin offering monthly contracts to gain higher volume, margins would likely take a big hit. We see iron ore becoming an over-supplied commodity in the near-term as Chinese iron ore production rises over the next few years.
Miners also differ in their take on these new contract requests BHP Billiton is already selling majority of its Iron Ore on monthly contracts, while Vale sees no need to move away from quarterly contracts. Rio Tinto currently enjoys a healthy margin from iron ore sales, but we expect that to decline going forward.
(sourced SeekingAlpha)
Monday, March 21, 2011
FITCH: short-term increase in Japanese demand for AUS thermal coal
Mon Mar 21, 2011 1:13am GMT
March 20 (Fitch) Ratings said today that electricity capacity shortfalls at Japan's nuclear plants will be met in the short term by coal and fuel oil fired generation. However, in the medium term, additional gas-fired capacity is the natural substitute for nuclear power. Australia's thermal coal and liquefied natural gas (LNG) export industries are well positioned to meet Japan's changing primary fuel requirements.
"Japanese gas-fired electricity generators were operating at high capacity prior to the earthquake and have limited ability to further increase production. This will limit the increase in demand for spot LNG cargos," says Arnon Musiker, Director in Fitch's Energy & Utilities team. "Fitch estimates that Japan lost up to 11GW of nuclear-fired baseload energy after the earthquake. Replacement of Onagawa, Fukishima, Daichi and Daini by new gas-fired generation could increase LNG demand by nine million tonnes per annum," added Mr Musiker.
Fitch's analysis indicates that only the Japanese coal and fuel-oil fired generators have sufficient capacity to substantially increase electricity production. This suggests that Japanese demand for Australian thermal coal may increase significantly over the next two to three years.
Gas-fired generation is the likely choice for new capacity given its relatively low carbon emission intensity and speed of construction. Moreover, the Japanese LNG import network appears to have spare capacity for additional imports and was reported as undamaged by the International Energy Agency after the earthquake and subsequent tsunami.
Fitch believes that Japanese utilities will seek to maintain a policy of diversifying gas supply, which could result in sufficient support for one to two new LNG trains in Australia. This is on the basis that 11GW of nuclear capacity is replaced by gas-fired generation, and 60% of the incremental gas demand is sourced from Australia. Likely beneficiaries include Browse and Pluto expansions, subject to securing gas reserves, which are promoted by Woodside Petroleum Ltd ('BBB+'/Negative), and Asia-Pacific LNG, promoted by Origin Energy Ltd ('BBB+/Stable') and ConocoPhillips ('A'/Stable).
Several countries have announced a review of planned nuclear generators, including China, which has an ambitious nuclear expansion programme to meet demand growth. Fitch estimates that one additional LNG train will be required for every five GW of nuclear generation capacity that is replaced by gas.
"If the outcome of the reviews leads to widespread cancellation of new nuclear capacity, there could be sufficient demand for Australian LNG to support those projects which are not yet fully contracted," added Mr Musiker. (Reuters)
"Japanese gas-fired electricity generators were operating at high capacity prior to the earthquake and have limited ability to further increase production. This will limit the increase in demand for spot LNG cargos," says Arnon Musiker, Director in Fitch's Energy & Utilities team. "Fitch estimates that Japan lost up to 11GW of nuclear-fired baseload energy after the earthquake. Replacement of Onagawa, Fukishima, Daichi and Daini by new gas-fired generation could increase LNG demand by nine million tonnes per annum," added Mr Musiker.
Fitch's analysis indicates that only the Japanese coal and fuel-oil fired generators have sufficient capacity to substantially increase electricity production. This suggests that Japanese demand for Australian thermal coal may increase significantly over the next two to three years.
Gas-fired generation is the likely choice for new capacity given its relatively low carbon emission intensity and speed of construction. Moreover, the Japanese LNG import network appears to have spare capacity for additional imports and was reported as undamaged by the International Energy Agency after the earthquake and subsequent tsunami.
Fitch believes that Japanese utilities will seek to maintain a policy of diversifying gas supply, which could result in sufficient support for one to two new LNG trains in Australia. This is on the basis that 11GW of nuclear capacity is replaced by gas-fired generation, and 60% of the incremental gas demand is sourced from Australia. Likely beneficiaries include Browse and Pluto expansions, subject to securing gas reserves, which are promoted by Woodside Petroleum Ltd ('BBB+'/Negative), and Asia-Pacific LNG, promoted by Origin Energy Ltd ('BBB+/Stable') and ConocoPhillips ('A'/Stable).
Several countries have announced a review of planned nuclear generators, including China, which has an ambitious nuclear expansion programme to meet demand growth. Fitch estimates that one additional LNG train will be required for every five GW of nuclear generation capacity that is replaced by gas.
"If the outcome of the reviews leads to widespread cancellation of new nuclear capacity, there could be sufficient demand for Australian LNG to support those projects which are not yet fully contracted," added Mr Musiker. (Reuters)
Monday, March 7, 2011
Colombia coal must look to Asia for demand - Expert
Monday, 07 Mar 2011
Reuters quoted an energy expert said Colombian coal producers should look to re balance exports to Asia since 50GW to 100GW of European coal power plants are seen shutting over the next 10 years.
Europe remains the main destination for high quality thermal coal from Colombia, the world's No 5 coal exporter, although the Latin American country saw a massive increase in exports to Asia last year.
Mr Malcolm Keay a senior research fellow at the Oxford Institute for Energy Studies said "The short term trend over the last few years has been relatively favorable for Colombia. The situation will persist for a while but the bar is very short, maybe over the next three years."
He said that "I don't think the good times will last the dominant, future trend is likely to be environmental regulation, the impact on investment on new power generation and the impact of the retirement of old, coal fire generation."
Mr Keay said he expects 50GW to 100GW of coal fired plants to go offline in the next 10 years due to environmental regulations. At least 26 coal fire schemes have been suspended or canceled in the last three years.
Mr Keay a former head of the industry group World Coal Association said the main issues for new coal fired plants in Europe are low electricity demand, environmental uncertainty and growth of renewables and nuclear energy.
Europe remains the main destination for high quality thermal coal from Colombia, the world's No 5 coal exporter, although the Latin American country saw a massive increase in exports to Asia last year.
Mr Malcolm Keay a senior research fellow at the Oxford Institute for Energy Studies said "The short term trend over the last few years has been relatively favorable for Colombia. The situation will persist for a while but the bar is very short, maybe over the next three years."
He said that "I don't think the good times will last the dominant, future trend is likely to be environmental regulation, the impact on investment on new power generation and the impact of the retirement of old, coal fire generation."
Mr Keay said he expects 50GW to 100GW of coal fired plants to go offline in the next 10 years due to environmental regulations. At least 26 coal fire schemes have been suspended or canceled in the last three years.
Mr Keay a former head of the industry group World Coal Association said the main issues for new coal fired plants in Europe are low electricity demand, environmental uncertainty and growth of renewables and nuclear energy.
He said that "Many plants will close starting from 2015 and running until about 2023. At the middle of the decade, a lot of factors are going to be working against coal." (sourced:Reuters)
Tags : environmental regulation, World Coal Association, coal power plant, Asia
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