Tuesday, October 25, 2011
ArcelorMittal to leave Peabody with $5 bn Macarthur bid
BRUSSELS: ArcelorMittal , the world's largest steelmaker, has unexpectedly pulled out of its joint $5 billion bid with Peabody Energy for Australian miner Macarthur Coal , just a day after the buyers said they had secured a majority of shares.
In a joint statement sent to Australian regulators by Peabody's legal advisors, ArcelorMittal and Peabody said the steel giant had "elected to sell its interest" in their bid vehicle, PEAMCoal, instead of proceeding with a joint venture.
ArcelorMittal did not say why it was selling out and was not available for comment.
Peabody and ArcelorMittal bid A$16 per share for the coal miner offer and said on Monday they already had a relevant interest in about 59.85 percent of the shares`.
China's Citic, which owns a quarter of Macarthur, said on Friday it had accepted the offer despite speculation it had been holding out for a higher price or could launch a rival offer of its own.
The last remaining major shareholder in Macarthur yet to accept the offer is South Korean steel maker POSCO , which owns a 7.25 percent stake.
If POSCO accepts the offer, that could help push acceptances above 90 percent, which would lead to Peabody raising the offer to A$16.25 a share.
Peabody said in Tuesday's statement that it would now own 100 percent in PEAMCoal and become owner of all the Macarthur shares that are tendered in the bid.
Shares in ArcelorMittal were 1.9 percent higher at 14.71 euros by 1123 GMT, when the STOXX Europe 600 Basic Resources sector index was up 0.8 percent.
Under the terms of its agreement with Peabody, ArcelorMittal must continue funding PEAMCoal for a further 90 days, the statement said.
ArcelorMittal and Peabody put in a bid for Macarthur in July, which the pair eventually took hostile in August after the Macarthur board said the bid undervalued the company.
A previous bid by Peabody to acquire Macarthur last year collapsed after Peabody cut its offer, blaming a new government mining tax.
sourced ET
India September Coal Imports Dropped 6.3%, Interocean Data Show
Tue,Oct 25, 2011
Coal imports by India’s power, cement and steel companies fell 6.3 percent in September, the second consecutive monthly drop, according to data from the Interocean Group of Companies.
Adani Enterprises Ltd. (ADE), Bhatia International Ltd., JSW Energy Ltd. (JSW) and other companies imported 9.27 million metric tons of steam and coking coal last month via 28 Indian ports, Interocean, a New Delhi-based ship broker, said in a document obtained by Bloomberg News. That’s down from 9.9 million tons received in August.
Mundra, a port on the west coast, where the Adani group imports most of its coal, received the highest shipments totaling 1.9 million tons. The eastern ports of Paradip, Krishnapatnam and Gangavaram received 927,213 tons, 723,422 tons and 624,837 tons of the commodity, respectively, Interocean data showed. Visakhapatnam, also in the east, received 615,225 tons.
Most imports came from Indonesia, Australia and South Africa, according to the document.
(sourced Bloomberg)
Coal imports by India’s power, cement and steel companies fell 6.3 percent in September, the second consecutive monthly drop, according to data from the Interocean Group of Companies.
Adani Enterprises Ltd. (ADE), Bhatia International Ltd., JSW Energy Ltd. (JSW) and other companies imported 9.27 million metric tons of steam and coking coal last month via 28 Indian ports, Interocean, a New Delhi-based ship broker, said in a document obtained by Bloomberg News. That’s down from 9.9 million tons received in August.
Mundra, a port on the west coast, where the Adani group imports most of its coal, received the highest shipments totaling 1.9 million tons. The eastern ports of Paradip, Krishnapatnam and Gangavaram received 927,213 tons, 723,422 tons and 624,837 tons of the commodity, respectively, Interocean data showed. Visakhapatnam, also in the east, received 615,225 tons.
Most imports came from Indonesia, Australia and South Africa, according to the document.
(sourced Bloomberg)
JFE, Sumitomo sticking to iron ore contracts
Tue Oct 25, 2011 2:54am EDT
* Japan not looking to buy from cheaper spot market
* JFE, Sumitomo: not received offers to cut Q4 iron ore prices
TOKYO Oct 25 (Reuters) - Japanese steelmakers JFE Holdings Inc and Sumitomo Metal Industries Ltd on Tuesday said they would not cancel their October-December iron ore contracts despite a plunge in spot market prices.
As spot prices fell to their lowest in 12 months, Chinese steel mills were seeking to postpone iron ore shipments or renegotiate fourth-quarter contracts, traders said, while top producer Vale said it was open to discussing a different pricing system with clients.
"It is against our creed that we break contracts and shift to spot buying when the market is not good. We believe that raw materials costs should remain stable," Eiji Hayashida, chairman of the Japan Iron and Steel Federation, told a news conference.
JFE had not received an offer from miners to reduce the October-December iron ore price, Hayashida added.
"We'll stick to purchasing contracts irrespective of the ups and downs of the spot market," an official at Sumitomo Metal Industries told Reuters.
Weaker demand for steel in China, the world's biggest consumer and producer, has dragged down steel prices <0#SRB:> and slashed the appetite for iron ore, the key raw material for the industry.
Under the quarterly contract system created last year, iron ore in the fourth-quarter will be priced at more than $175 a tonne, much higher than the current spot market rate of around $142. .IO62-CNI=SI
Hayashida said global financial woes and floods in Thailand may reduce Japan's crude steel output in April 2011-March 2012 by 1 million tonnes to below 108 million tonnes.
Thailand's worst flooding in five decades forced Toyota Motor Corp to suspend production through Oct. 28 due to supply disruptions. Japan's biggest automaker said it had lost production of 37,500 vehicles since output was halted on Oct. 10.
Thailand is Japan's third-biggest export market for steel, followed by South Korea and China, accounting for 11 percent of Japan's steel exports in January-August.
(sourced Reuters)
* Japan not looking to buy from cheaper spot market
* JFE, Sumitomo: not received offers to cut Q4 iron ore prices
TOKYO Oct 25 (Reuters) - Japanese steelmakers JFE Holdings Inc and Sumitomo Metal Industries Ltd on Tuesday said they would not cancel their October-December iron ore contracts despite a plunge in spot market prices.
As spot prices fell to their lowest in 12 months, Chinese steel mills were seeking to postpone iron ore shipments or renegotiate fourth-quarter contracts, traders said, while top producer Vale said it was open to discussing a different pricing system with clients.
"It is against our creed that we break contracts and shift to spot buying when the market is not good. We believe that raw materials costs should remain stable," Eiji Hayashida, chairman of the Japan Iron and Steel Federation, told a news conference.
JFE had not received an offer from miners to reduce the October-December iron ore price, Hayashida added.
"We'll stick to purchasing contracts irrespective of the ups and downs of the spot market," an official at Sumitomo Metal Industries told Reuters.
Weaker demand for steel in China, the world's biggest consumer and producer, has dragged down steel prices <0#SRB:> and slashed the appetite for iron ore, the key raw material for the industry.
Under the quarterly contract system created last year, iron ore in the fourth-quarter will be priced at more than $175 a tonne, much higher than the current spot market rate of around $142. .IO62-CNI=SI
Hayashida said global financial woes and floods in Thailand may reduce Japan's crude steel output in April 2011-March 2012 by 1 million tonnes to below 108 million tonnes.
Thailand's worst flooding in five decades forced Toyota Motor Corp to suspend production through Oct. 28 due to supply disruptions. Japan's biggest automaker said it had lost production of 37,500 vehicles since output was halted on Oct. 10.
Thailand is Japan's third-biggest export market for steel, followed by South Korea and China, accounting for 11 percent of Japan's steel exports in January-August.
(sourced Reuters)
Essar’s Zimbabwean steel quest turns sour
The African nation declines to supply the resource; firm may have to renegotiate the terms of the contract
Tue, Oct 25 2011
The Essar Group’s quest for iron ore remains elusive with Zimbabwe declining to supply the resource as envisaged in a contentious deal between the Indian conglomerate and the African state.
The Essar Group may have to renegotiate the terms of the contract if it wants to continue with its plans in the African nation.
Zimbabwe won’t sell 90% of its iron ore resources to one company, mines and mining development deputy minister Gift Chimanikire said. He added that the provision in the current pact that allowed this was wrong.
“We have said to them (Essar): Do not expect us to hand over these resources. As government, we cannot just do that,” Chimanikire was quoted as saying by The Herald, a daily published by the Zimbabwean government.
An Essar Group spokesman said it was against company policy to comment on speculative reports.
“Essar continues to hold discussions with the Zimbabwe government over a number of issues relating to the Zisco (Zimbabwe Iron and Steel Co.) transaction, and we continue to make progress. However, we would not like to comment on any specific points,” the spokesman said.
Essar’s deal to gain access to a captive source of iron ore has been caught in political crossfire ever since it was signed in early August.
The Essar Group and Zimbabwe announced the launch of NewZim Steel Pvt. Ltd and NewZim Minerals Pvt. Ltd to revive Zisco, committing an $850 million investment by Essar Africa with the promise of job creation.
The shareholding structure in the two joint ventures was envisaged at 60:40 and 80:20, respectively.
Essar also committed to revive Zisco to its original capacity and unveiled a plan to double annual capacity to 2.5 million tonnes.
NewZim Minerals was to undertake exploration and technology assessment, with a testing programme commencing in the first 18 months. After this, depending on the outcome, it was to construct a large-scale beneficiation project and related infrastructure for an estimated expenditure of $3.5 billion.
Beneficiation is a process in which low-grade iron ore is upgraded to higher iron content through concentration and elimination of impurities.
Some members of Zimbabwe’s coalition government have questioned the deal, even as the strife-torn nation’s President Robert Mugabe has called for a general election in early 2012.
Industry and commerce minister Welshman Ncube led negotiations when the deal was signed.
Ncube is part of the Mutambara faction of the Movement for Democratic Change (MDC-M), which split in 2005 from the original Movement for Democratic Change, called MDC-T, headed by current Prime Minister Morgan Tsvangirai. Chimanikire belongs to MDC-T’s Tsvangirai faction.
Both factions of the MDC share an uneasy alliance with the Zanu-PF in the current coalition government.
Zimbabwe’s 87-year-old President Mugabe, the leader of the Zanu-PF party, has been ruling the country for three decades, but was forced to share power with political opponent Tsvangirai after the 2008 elections.
As no candidate received an outright majority in the first round of elections, a second was called, but Tsvangirai withdrew his candidature a week before this, citing violence against his party’s supporters.
Amid sustained international pressure, former South African president Thabo Mbeki brokered a power-sharing agreement with an arrangement, the so-called Global Political Agreement, for Mugabe to remain President while Tsvangirai was made Prime Minister.
“Resource nationalism is rising in many parts of the world where governments and other stakeholders believe that value has already been created once it’s known that resources exist, but that is a misplaced notion,” said Anjani Agrawal, national leader for mining and metals sector at global consultancy Ernst and Young.
Resource nationalism refers to the recent trend of governments across the world targeting the metals and mining sector to increase revenue in the face of commodity deficits and the consequent rise in prices.
Essar Africa Holdings Ltd, a group company incorporated in Mauritius, emerged as the preferred bidder for Zisco and the iron ore resources that it owned beating the world’s largest steel maker by capacity, ArcelorMittal, and the Naveen Jindal-headed Jindal Steel and Power Ltd.
keyword- Essar Group, Zisco, imbabwe
sourced livemint
Tue, Oct 25 2011
The Essar Group’s quest for iron ore remains elusive with Zimbabwe declining to supply the resource as envisaged in a contentious deal between the Indian conglomerate and the African state.
The Essar Group may have to renegotiate the terms of the contract if it wants to continue with its plans in the African nation.
Zimbabwe won’t sell 90% of its iron ore resources to one company, mines and mining development deputy minister Gift Chimanikire said. He added that the provision in the current pact that allowed this was wrong.
“We have said to them (Essar): Do not expect us to hand over these resources. As government, we cannot just do that,” Chimanikire was quoted as saying by The Herald, a daily published by the Zimbabwean government.
An Essar Group spokesman said it was against company policy to comment on speculative reports.
“Essar continues to hold discussions with the Zimbabwe government over a number of issues relating to the Zisco (Zimbabwe Iron and Steel Co.) transaction, and we continue to make progress. However, we would not like to comment on any specific points,” the spokesman said.
Essar’s deal to gain access to a captive source of iron ore has been caught in political crossfire ever since it was signed in early August.
The Essar Group and Zimbabwe announced the launch of NewZim Steel Pvt. Ltd and NewZim Minerals Pvt. Ltd to revive Zisco, committing an $850 million investment by Essar Africa with the promise of job creation.
The shareholding structure in the two joint ventures was envisaged at 60:40 and 80:20, respectively.
Essar also committed to revive Zisco to its original capacity and unveiled a plan to double annual capacity to 2.5 million tonnes.
NewZim Minerals was to undertake exploration and technology assessment, with a testing programme commencing in the first 18 months. After this, depending on the outcome, it was to construct a large-scale beneficiation project and related infrastructure for an estimated expenditure of $3.5 billion.
Beneficiation is a process in which low-grade iron ore is upgraded to higher iron content through concentration and elimination of impurities.
Some members of Zimbabwe’s coalition government have questioned the deal, even as the strife-torn nation’s President Robert Mugabe has called for a general election in early 2012.
Industry and commerce minister Welshman Ncube led negotiations when the deal was signed.
Ncube is part of the Mutambara faction of the Movement for Democratic Change (MDC-M), which split in 2005 from the original Movement for Democratic Change, called MDC-T, headed by current Prime Minister Morgan Tsvangirai. Chimanikire belongs to MDC-T’s Tsvangirai faction.
Both factions of the MDC share an uneasy alliance with the Zanu-PF in the current coalition government.
Zimbabwe’s 87-year-old President Mugabe, the leader of the Zanu-PF party, has been ruling the country for three decades, but was forced to share power with political opponent Tsvangirai after the 2008 elections.
As no candidate received an outright majority in the first round of elections, a second was called, but Tsvangirai withdrew his candidature a week before this, citing violence against his party’s supporters.
Amid sustained international pressure, former South African president Thabo Mbeki brokered a power-sharing agreement with an arrangement, the so-called Global Political Agreement, for Mugabe to remain President while Tsvangirai was made Prime Minister.
“Resource nationalism is rising in many parts of the world where governments and other stakeholders believe that value has already been created once it’s known that resources exist, but that is a misplaced notion,” said Anjani Agrawal, national leader for mining and metals sector at global consultancy Ernst and Young.
Resource nationalism refers to the recent trend of governments across the world targeting the metals and mining sector to increase revenue in the face of commodity deficits and the consequent rise in prices.
Essar Africa Holdings Ltd, a group company incorporated in Mauritius, emerged as the preferred bidder for Zisco and the iron ore resources that it owned beating the world’s largest steel maker by capacity, ArcelorMittal, and the Naveen Jindal-headed Jindal Steel and Power Ltd.
keyword- Essar Group, Zisco, imbabwe
sourced livemint
Analysis: Iron ore giants gamble on long-term Asian demand
Tue Oct 25, 2011
SYDNEY (Reuters) - Iron ore prices are in tailspin -- down 20 percent in the last month and clocking seven straight weeks of losses -- and the world's biggest producers couldn't seem to care less.
Last year's contentious shift away from once-a-year pricing of ore in favor of shorter term contracts is now delivering lower returns on sales of more ore, yet miners appear unworried about the market's gloomy performance, moving full steam ahead on massive expansion projects.
That's because the more iron ore is sold at spot, the less smaller suppliers can compete with the mega-producers -- namely Vale (VALE5.SA), Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)(BLT.L) -- who enjoy vast economies of scale and together control more than 70 percent of the global seaborne market.
"The big producers are taking a much longer view on market forces, which takes into account growth projections in China and are gearing up for that by developing more mines," said Grant Craighead, a mining analyst with Stock Resources in Sydney.
Some 86 percent of Rio's third-quarter sales were based on average prices for the preceding quarter -- lower than earlier sales over comparable periods as spot sales increased -- Tom Albanese, chief executive of Rio, the world's No. 2 iron ore producer, told financial analysts in a presentation this week.
"Shipments are strong and we are selling everything we can produce," Albanese said.
Rio is accelerating a program to lift output by 50 percent to 333 million tonnes a year by 2015. BHP is aiming for a 37 percent rise in production to 220 million tonnes by around the same time.
Vale aims to boost yearly iron ore output to 469 million tonnes by 2015 from 308 million in 2010.
The next biggest producers, including South Africa's AngloAmerican (AAL.L) and Fortescue Metals Group (FMG.AX), mine less than 50 million tonnes a year each.
Rio and BHP, more than Vale, have been aggressively selling directly into the Chinese spot market over the last month after running their mines above capacity, further undermining the price.
Such sales came mostly as buyers of lower-grade ore mined in China switched away to exploit the chance of acquiring richer Australia ore at comparable prices. Marginal Chinese domestic iron ore production is now $20 a tonne higher than a couple of years ago, boosted by grade declines and cost inflation.
This helped offset the effects of what many industry players consider to have been a moratorium in China from taking delivery on shipments priced on the contract basis over the second quarter. By most accounts the ban has passed, with mills again in restocking mode.
BHP alone sold eight capesize cargoes of iron ore in 24 hours in September, which Bank of America Merrill Lynch analyst Peter O'Connor called an outcome that would normally have taken several weeks.
Rio's level of averaged-price sales is also outside the norm, driven by its strong production that allowed more sales into the spot market.
Iron ore prices plummeted a further 8 percent last week, the seventh straight week of losses and the sharpest drop since July 2010.
"FORUM SHOPPING"
BHP Chief Executive Marius Kloppers, whose mantra is "run assets at full capacity all the time and achieve market price," defends short-term pricing because it means customers have little reason to dispute or delay shipments.
"I have not seen any of what I saw in the global financial crisis, which was the equivalent of forum shopping, where one party's customers defaulted but bought from another," he said on the sidelines of BHP's annual meeting in London.
Vale, the largest of the three producers, reluctantly discarded the once-a-year-price system after BHP and Rio bowed out, cognizant it would upset customers. In the end it had no choice but to follow suit.
Now, with spot prices trailing the last quarter's average price mark and lead times on Brazilian cargoes to China much longer than the Australian miners, Vale has announced it is open to alternative pricing systems.
UBS commodities analyst Tom Price said Vale had already agreed to a request from customers in China for provisional pricing to remove the quarter-long lag on the spot versus contract price.
This mechanism varies from spot in that it reflects the average spot price for the quarter, not that for any given day.
Vale is leading this move as it remains the most vulnerable to losing volumes, according to Price.
"Lead times on its deliveries are longer, allowing clients to delay decisions on Australian material for longer than with Vale," he said.
UNDER PRESSURE
Already, Chinese steel mills under pressure to maintain sales margins are said to be delaying iron ore purchases on expectations that prices will continue to drop. China steel futures fell more than 5 percent late last week in the contract's steepest decline ever, suggesting such delaying tactics might spread.
Even before China announced slower-than-expected 9.1 percent third-quarter GDP growth, evidence of a slowdown in its steel sector was mounting.
China's road construction is facing unprecedented capital shortages, with some provincial governments failing to pay engineering companies for two to three consecutive months, according to the official People's Daily.
More telling, say analysts, the price of rebar used for construction in China is down 20 percent since August.
Still, such warnings may fall on deaf ears.
"Miners are still seeing a very high profit margin despite falling prices, and they can also take the advantage to beat smaller emerging rivals to retain market share, so why not produce?" asked a senior iron ore trader in Shanghai.
UBS said it sees the spot price correction reversing next month as China's steel producers resume seasonal restocking of raw materials following a summer respite.
Iron ore prices hit a 13-month low around $144 a tonne on Friday, and were unlikely to sink much lower, according to a high-ranking executive at South Korea's top steelmaker POSCO (005490.KS).
"I think the $130 to $140 levels will be a bottom. When prices fall below $130 to $140, China will not produce (iron ore), but import it. I see prices rebounding," the official, who declined to be identified, told Reuters.
Australian forecasting group BIS Schrapnel believes that while volatility is likely to continue over the next five years, healthy Asian demand for iron ore and other commodities is set to continue.
"Rapid economic growth in developing, metals and energy intensive economies such as China and India continues to drive strong demand for Australian resources, despite the prospect of weaker economic growth in Europe and the United States," BIS said in a report.
Not everyone agrees.
Goldman Sachs expects the iron ore price to keep to a downward course through at least 2014, when it will average only $110 a tonne -- a far cry from the record $192 of last February.
"The risk for the big producers now is that prices keep falling and with it goes profit margins," said Stock Resources's Craighead.
Still, the mining companies insist they are more interested in the long haul, unfazed by daily ups and downs in prices and more attuned to the massive growth projections for China in justifying their big spends to ramp up output.
That may eventually prove wise, though it could be a rough course to hold given the over-weight exposure to iron ore these so-called diversified miners hold.
"For a commodity such as iron ore, you're really very focused on the strength of the Chinese economy," said Catherine Raw, a portfolio manager for the natural resources investment division of fund manager BlackRock (BLK.N).
"With over 50 percent of the world's iron ore consumed by China, your outlook for the iron ore price is going to be determined by your outlook for Chinese economic growth."
(sourced Reuters)
SYDNEY (Reuters) - Iron ore prices are in tailspin -- down 20 percent in the last month and clocking seven straight weeks of losses -- and the world's biggest producers couldn't seem to care less.
Last year's contentious shift away from once-a-year pricing of ore in favor of shorter term contracts is now delivering lower returns on sales of more ore, yet miners appear unworried about the market's gloomy performance, moving full steam ahead on massive expansion projects.
That's because the more iron ore is sold at spot, the less smaller suppliers can compete with the mega-producers -- namely Vale (VALE5.SA), Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)(BLT.L) -- who enjoy vast economies of scale and together control more than 70 percent of the global seaborne market.
"The big producers are taking a much longer view on market forces, which takes into account growth projections in China and are gearing up for that by developing more mines," said Grant Craighead, a mining analyst with Stock Resources in Sydney.
Some 86 percent of Rio's third-quarter sales were based on average prices for the preceding quarter -- lower than earlier sales over comparable periods as spot sales increased -- Tom Albanese, chief executive of Rio, the world's No. 2 iron ore producer, told financial analysts in a presentation this week.
"Shipments are strong and we are selling everything we can produce," Albanese said.
Rio is accelerating a program to lift output by 50 percent to 333 million tonnes a year by 2015. BHP is aiming for a 37 percent rise in production to 220 million tonnes by around the same time.
Vale aims to boost yearly iron ore output to 469 million tonnes by 2015 from 308 million in 2010.
The next biggest producers, including South Africa's AngloAmerican (AAL.L) and Fortescue Metals Group (FMG.AX), mine less than 50 million tonnes a year each.
Rio and BHP, more than Vale, have been aggressively selling directly into the Chinese spot market over the last month after running their mines above capacity, further undermining the price.
Such sales came mostly as buyers of lower-grade ore mined in China switched away to exploit the chance of acquiring richer Australia ore at comparable prices. Marginal Chinese domestic iron ore production is now $20 a tonne higher than a couple of years ago, boosted by grade declines and cost inflation.
This helped offset the effects of what many industry players consider to have been a moratorium in China from taking delivery on shipments priced on the contract basis over the second quarter. By most accounts the ban has passed, with mills again in restocking mode.
BHP alone sold eight capesize cargoes of iron ore in 24 hours in September, which Bank of America Merrill Lynch analyst Peter O'Connor called an outcome that would normally have taken several weeks.
Rio's level of averaged-price sales is also outside the norm, driven by its strong production that allowed more sales into the spot market.
Iron ore prices plummeted a further 8 percent last week, the seventh straight week of losses and the sharpest drop since July 2010.
"FORUM SHOPPING"
BHP Chief Executive Marius Kloppers, whose mantra is "run assets at full capacity all the time and achieve market price," defends short-term pricing because it means customers have little reason to dispute or delay shipments.
"I have not seen any of what I saw in the global financial crisis, which was the equivalent of forum shopping, where one party's customers defaulted but bought from another," he said on the sidelines of BHP's annual meeting in London.
Vale, the largest of the three producers, reluctantly discarded the once-a-year-price system after BHP and Rio bowed out, cognizant it would upset customers. In the end it had no choice but to follow suit.
Now, with spot prices trailing the last quarter's average price mark and lead times on Brazilian cargoes to China much longer than the Australian miners, Vale has announced it is open to alternative pricing systems.
UBS commodities analyst Tom Price said Vale had already agreed to a request from customers in China for provisional pricing to remove the quarter-long lag on the spot versus contract price.
This mechanism varies from spot in that it reflects the average spot price for the quarter, not that for any given day.
Vale is leading this move as it remains the most vulnerable to losing volumes, according to Price.
"Lead times on its deliveries are longer, allowing clients to delay decisions on Australian material for longer than with Vale," he said.
UNDER PRESSURE
Already, Chinese steel mills under pressure to maintain sales margins are said to be delaying iron ore purchases on expectations that prices will continue to drop. China steel futures fell more than 5 percent late last week in the contract's steepest decline ever, suggesting such delaying tactics might spread.
Even before China announced slower-than-expected 9.1 percent third-quarter GDP growth, evidence of a slowdown in its steel sector was mounting.
China's road construction is facing unprecedented capital shortages, with some provincial governments failing to pay engineering companies for two to three consecutive months, according to the official People's Daily.
More telling, say analysts, the price of rebar used for construction in China is down 20 percent since August.
Still, such warnings may fall on deaf ears.
"Miners are still seeing a very high profit margin despite falling prices, and they can also take the advantage to beat smaller emerging rivals to retain market share, so why not produce?" asked a senior iron ore trader in Shanghai.
UBS said it sees the spot price correction reversing next month as China's steel producers resume seasonal restocking of raw materials following a summer respite.
Iron ore prices hit a 13-month low around $144 a tonne on Friday, and were unlikely to sink much lower, according to a high-ranking executive at South Korea's top steelmaker POSCO (005490.KS).
"I think the $130 to $140 levels will be a bottom. When prices fall below $130 to $140, China will not produce (iron ore), but import it. I see prices rebounding," the official, who declined to be identified, told Reuters.
Australian forecasting group BIS Schrapnel believes that while volatility is likely to continue over the next five years, healthy Asian demand for iron ore and other commodities is set to continue.
"Rapid economic growth in developing, metals and energy intensive economies such as China and India continues to drive strong demand for Australian resources, despite the prospect of weaker economic growth in Europe and the United States," BIS said in a report.
Not everyone agrees.
Goldman Sachs expects the iron ore price to keep to a downward course through at least 2014, when it will average only $110 a tonne -- a far cry from the record $192 of last February.
"The risk for the big producers now is that prices keep falling and with it goes profit margins," said Stock Resources's Craighead.
Still, the mining companies insist they are more interested in the long haul, unfazed by daily ups and downs in prices and more attuned to the massive growth projections for China in justifying their big spends to ramp up output.
That may eventually prove wise, though it could be a rough course to hold given the over-weight exposure to iron ore these so-called diversified miners hold.
"For a commodity such as iron ore, you're really very focused on the strength of the Chinese economy," said Catherine Raw, a portfolio manager for the natural resources investment division of fund manager BlackRock (BLK.N).
"With over 50 percent of the world's iron ore consumed by China, your outlook for the iron ore price is going to be determined by your outlook for Chinese economic growth."
(sourced Reuters)
NTPC may fall short by 18 billion units in FY12
Production cut as state electricity boards shun costlier power being generated due to use of expensive imported coal
Tue, Oct25, 2011
New Delhi: NTPC Ltd, India’s largest power generator, may fall around 18 billion units short of its potential production capacity in the current fiscal, as state electricity boards (SEBs) shun purchases of expensive electricity produced with imported coal.
The company is bracing for the production shortfall, equivalent to nearly half of Delhi’s annual power consumption, at a time when India is battling a power deficit.
The expected shortfall in power generation by the state-owned utility is a 38% rise over the last fiscal, when it fell short of its generating capacity by 13 billion units.
With the supply of domestic coal at a low, NTPC has to burn imported coal that is increasing the cost of power. SEBs’ aversion to buying expensive power has already resulted in NTPC reducing its power generation in the current fiscal to the tune of 7 billion units, which is now expected to more than double.
“Since we have adequate amount of imported coal, we are ready to supply power generated from that coal, but the SEBs are unwilling to buy expensive power, leading to our stations backing down,” said a senior NTPC executive on condition of anonymity.
India has an annual electricity requirement of 700 billion units, of which around 220 billion units is supplied by NTPC.
Cutting the power generation will dent revenue at NTPC but not its profit, because state utilities have to pay a fixed amount to the power producer even if they do not draw any electricity. The variable payment to NTPC includes the cost of fuel to generate the power. NTPC posted a net profit of Rs. 6,011 crore on revenue of Rs. 43,337 crore in the year ended 31 March.
A spokesperson for NTPC said it’s difficult at this stage for the utility to comment on production for the year.
“The increase in variable price is largely due to increase in imported coal use,” the NTPC spokesperson said.
NTPC needs 166 million tonnes (mt) of coal in the year to 31 March, of which around 16 mt has to be imported. The company has already placed orders for importing 12 mt.
While electricity tariffs at NTPC’s stations differ from project to project, the average tariff per unit of electricity charged by the utility is around Rs. 2.63. Of this, the fixed cost is Rs. 1 per unit, with the balance being the fuel cost.
“While imported coal is expensive, even the price of domestic coal has gone up and states don’t want to buy expensive power,” said a second NTPC executive, who too didn’t want to be named. “A 10% increase in blending imported coal leads to a tariff increase of 30-35 paise per unit.”
SEBs across India are saddled with losses because of power theft during transmission and distribution, billing inefficiencies and, more importantly, because they have to buy expensive power to tide over short-term deficits.
The “situation will only improve for utilities like NTPC once the SEB finances improve”, said a senior power ministry official, requesting anonymity.
India is battling a power deficit because of coal shortages on account of faltering local production.
In what could be the worst case of coal shortage faced by India’s power sector, 41 thermal projects have less than a week’s coal reserves to support power generation and 28 projects have less than four days’ stock.
Power projects situated near coal mines are supposed to have a reserve of two weeks while those located far from the mines should have at least a month’s supply in reserve. India has 75 thermal power projects that depend on Coal India Ltd for fuel supplies.
“At the end of the day, we are not getting the required amount of domestic coal,” said a third NTPC executive, also requesting anonymity. “That results in us having to forego revenue as we generate less than what we are capable of.”
NTPC, which generates 8 megawatts (MW) of every 10MW it produces by burning coal, is looking to increase installed capacity from 34,854MW now to 75,000MW by 2017 and 128,000MW by 2032.
Coal India has an 82% share of the country’s coal production, but has been unable to keep pace with rising demand. It is to supply NTPC 145 mt in the current fiscal year.
sourced livemint
Tue, Oct25, 2011
New Delhi: NTPC Ltd, India’s largest power generator, may fall around 18 billion units short of its potential production capacity in the current fiscal, as state electricity boards (SEBs) shun purchases of expensive electricity produced with imported coal.
The company is bracing for the production shortfall, equivalent to nearly half of Delhi’s annual power consumption, at a time when India is battling a power deficit.
The expected shortfall in power generation by the state-owned utility is a 38% rise over the last fiscal, when it fell short of its generating capacity by 13 billion units.
With the supply of domestic coal at a low, NTPC has to burn imported coal that is increasing the cost of power. SEBs’ aversion to buying expensive power has already resulted in NTPC reducing its power generation in the current fiscal to the tune of 7 billion units, which is now expected to more than double.
“Since we have adequate amount of imported coal, we are ready to supply power generated from that coal, but the SEBs are unwilling to buy expensive power, leading to our stations backing down,” said a senior NTPC executive on condition of anonymity.
India has an annual electricity requirement of 700 billion units, of which around 220 billion units is supplied by NTPC.
Cutting the power generation will dent revenue at NTPC but not its profit, because state utilities have to pay a fixed amount to the power producer even if they do not draw any electricity. The variable payment to NTPC includes the cost of fuel to generate the power. NTPC posted a net profit of Rs. 6,011 crore on revenue of Rs. 43,337 crore in the year ended 31 March.
A spokesperson for NTPC said it’s difficult at this stage for the utility to comment on production for the year.
“The increase in variable price is largely due to increase in imported coal use,” the NTPC spokesperson said.
NTPC needs 166 million tonnes (mt) of coal in the year to 31 March, of which around 16 mt has to be imported. The company has already placed orders for importing 12 mt.
While electricity tariffs at NTPC’s stations differ from project to project, the average tariff per unit of electricity charged by the utility is around Rs. 2.63. Of this, the fixed cost is Rs. 1 per unit, with the balance being the fuel cost.
“While imported coal is expensive, even the price of domestic coal has gone up and states don’t want to buy expensive power,” said a second NTPC executive, who too didn’t want to be named. “A 10% increase in blending imported coal leads to a tariff increase of 30-35 paise per unit.”
SEBs across India are saddled with losses because of power theft during transmission and distribution, billing inefficiencies and, more importantly, because they have to buy expensive power to tide over short-term deficits.
The “situation will only improve for utilities like NTPC once the SEB finances improve”, said a senior power ministry official, requesting anonymity.
India is battling a power deficit because of coal shortages on account of faltering local production.
In what could be the worst case of coal shortage faced by India’s power sector, 41 thermal projects have less than a week’s coal reserves to support power generation and 28 projects have less than four days’ stock.
Power projects situated near coal mines are supposed to have a reserve of two weeks while those located far from the mines should have at least a month’s supply in reserve. India has 75 thermal power projects that depend on Coal India Ltd for fuel supplies.
“At the end of the day, we are not getting the required amount of domestic coal,” said a third NTPC executive, also requesting anonymity. “That results in us having to forego revenue as we generate less than what we are capable of.”
NTPC, which generates 8 megawatts (MW) of every 10MW it produces by burning coal, is looking to increase installed capacity from 34,854MW now to 75,000MW by 2017 and 128,000MW by 2032.
Coal India has an 82% share of the country’s coal production, but has been unable to keep pace with rising demand. It is to supply NTPC 145 mt in the current fiscal year.
sourced livemint
Macarthur Coal directors to appoint Peabody-Arcelor nominees
Tue, Oct25, 2011
THE directors of Australian coal miner Macarthur Coal will stand down tomorrow and appoint nominees of the joint venture between Peabody Energy and ArcelorMittal, which took control of the miner yesterday, the company said.
Macarthur chairman Keith DeLacy said the takeover, which values Macarthur at $4.9 billion, was a "testament to Macarthur's extraordinary growth over the last decade".
The takeover joint venture, PEAMCoal, announced late yesterday that it had acquired 59.86 per cent of Macarthur shares, with a further 2.51 per cent in an acceptance facility, giving the company 62.37 per cent of shares.
US giant Peabody Energy yesterday completed its 19-month battle for the Queensland company.
The takeover was finalised as reports emerged last night of a possible bid for another Queensland coal producer, New Hope, Sarah-Jane Tasker reported yesterday.
The Peabody-ArcelorMittal $16-a-share bid was launched on July 11.
The US giant, which already operates eight projects in Queensland and NSW, had made four unsuccessful offers early last year.
It offered $13 a share in March 2010, before raising the bid to $14 a week later and $16 on April 15.
On May 10, the company reduced its offer to $15 a share following the controversy over Kevin Rudd's failed resource super-profits tax.
But Peabody did not give up and in July this year it gained the support of Macarthur's major shareholder ArcelorMittal, which had a 16 per cent stake, to resurrect its move on the miner, the day after the Gillard government announced the carbon tax.
The two parties had originally offered $15.50 a share, but the target's board secured the $16 price to win its support.
PeamCoal, the 60-40 joint venture formed by Peabody and Arcelor to bid for Macarthur, then announced on Friday that it would increase the offer price to $16.25 a share if it acquired at least 90 per cent of the miner by November 11.
(sourced The Autralian)
THE directors of Australian coal miner Macarthur Coal will stand down tomorrow and appoint nominees of the joint venture between Peabody Energy and ArcelorMittal, which took control of the miner yesterday, the company said.
Macarthur chairman Keith DeLacy said the takeover, which values Macarthur at $4.9 billion, was a "testament to Macarthur's extraordinary growth over the last decade".
The takeover joint venture, PEAMCoal, announced late yesterday that it had acquired 59.86 per cent of Macarthur shares, with a further 2.51 per cent in an acceptance facility, giving the company 62.37 per cent of shares.
US giant Peabody Energy yesterday completed its 19-month battle for the Queensland company.
The takeover was finalised as reports emerged last night of a possible bid for another Queensland coal producer, New Hope, Sarah-Jane Tasker reported yesterday.
The Peabody-ArcelorMittal $16-a-share bid was launched on July 11.
The US giant, which already operates eight projects in Queensland and NSW, had made four unsuccessful offers early last year.
It offered $13 a share in March 2010, before raising the bid to $14 a week later and $16 on April 15.
On May 10, the company reduced its offer to $15 a share following the controversy over Kevin Rudd's failed resource super-profits tax.
But Peabody did not give up and in July this year it gained the support of Macarthur's major shareholder ArcelorMittal, which had a 16 per cent stake, to resurrect its move on the miner, the day after the Gillard government announced the carbon tax.
The two parties had originally offered $15.50 a share, but the target's board secured the $16 price to win its support.
PeamCoal, the 60-40 joint venture formed by Peabody and Arcelor to bid for Macarthur, then announced on Friday that it would increase the offer price to $16.25 a share if it acquired at least 90 per cent of the miner by November 11.
(sourced The Autralian)
China Qinhuangdao coal price rises to highest in three years - Business Week
Monday, 24 October 11
Business week reported that, China’s power-station coal price rose to the highest level in three years as power stations and central heating plants built up stocks to meet winter demand.
Coal with an energy value of 5,500 kilocalories per kilogram rose 0.6 percent to a range of 850 yuan ($133) to 860 yuan a metric ton as of yesterday compared with a week earlier, according to data today from the China Coal Transport and Distribution Association. That’s the highest price since Oct. 20, 2008.
The benchmark price has risen 3 percent since Sept. 11. Inventories at the port, which ships half of China’s seaborne coal supplies, climbed 3.2 percent to 5 million tons from a week earlier and are at the third-lowest level this year.
The National Energy Administration said last month that provinces in southern and central China, which rely on hydropower, and areas that have low power tariffs, will face tighter electricity supply in the winter and spring. The supply shortfall may be as much as 26 gigawatts, the official Xinhua news agency reported Oct. 20, citing Tan Rongyao, a spokesman with the State Electricity Regulatory Commission.
Northern Chinese cities typically distribute heating from centralized plants in November through March. The temperature in northern China has dropped as much as 14 degrees Celsius (57 degrees Fahrenheit) since yesterday and the temperature in central and eastern China will drop as much as 10 degrees Celsius by tomorrow, according to the China Meteorological Administration.
China, the world’s biggest coal consumer, bought record amounts of the fuel in September as importers sought cheaper regional supplies. Imports rose 25 percent to 19.1 million metric tons from a year earlier, the National Development and Reform Commission said on Oct.20.
The nation’s largest power stations had 70.9 million tons of inventories as of Oct. 18, the equivalent of 20 days of consumption, the NDRC said. That’s an increase of 6.3 million tons from the end of September, it said.
Source Businessweek via coal spot
If you believe an article violates your rights or the rights of others, please contact us.
Business week reported that, China’s power-station coal price rose to the highest level in three years as power stations and central heating plants built up stocks to meet winter demand.
Coal with an energy value of 5,500 kilocalories per kilogram rose 0.6 percent to a range of 850 yuan ($133) to 860 yuan a metric ton as of yesterday compared with a week earlier, according to data today from the China Coal Transport and Distribution Association. That’s the highest price since Oct. 20, 2008.
The benchmark price has risen 3 percent since Sept. 11. Inventories at the port, which ships half of China’s seaborne coal supplies, climbed 3.2 percent to 5 million tons from a week earlier and are at the third-lowest level this year.
The National Energy Administration said last month that provinces in southern and central China, which rely on hydropower, and areas that have low power tariffs, will face tighter electricity supply in the winter and spring. The supply shortfall may be as much as 26 gigawatts, the official Xinhua news agency reported Oct. 20, citing Tan Rongyao, a spokesman with the State Electricity Regulatory Commission.
Northern Chinese cities typically distribute heating from centralized plants in November through March. The temperature in northern China has dropped as much as 14 degrees Celsius (57 degrees Fahrenheit) since yesterday and the temperature in central and eastern China will drop as much as 10 degrees Celsius by tomorrow, according to the China Meteorological Administration.
China, the world’s biggest coal consumer, bought record amounts of the fuel in September as importers sought cheaper regional supplies. Imports rose 25 percent to 19.1 million metric tons from a year earlier, the National Development and Reform Commission said on Oct.20.
The nation’s largest power stations had 70.9 million tons of inventories as of Oct. 18, the equivalent of 20 days of consumption, the NDRC said. That’s an increase of 6.3 million tons from the end of September, it said.
Source Businessweek via coal spot
If you believe an article violates your rights or the rights of others, please contact us.
Luzhong Mining Group cut iron concentrates Ex works price
Tuesday, 25 Oct 2011
Luzhong Mining Group cut 64 percent grade alkaline iron concentrates ex-works price by CNY 70 to CNY1, 330 per tonne.
Source steelhome.cn
Luzhong Mining Group cut 64 percent grade alkaline iron concentrates ex-works price by CNY 70 to CNY1, 330 per tonne.
Source steelhome.cn
APAC Resources see iron ore buyers in Asia
Tuesday, 25 Oct 2011
APAC Resources is looking for iron ore buyers in Asia to counter the effects of an economic slowdown in the mainland.
The SAR based firm is mainly involved in natural resources investment and iron ore exports to China, where its customers are steel plants in Shanxi, Shandong, Jiangxi and Jiangsu provinces.
Chief executive officer Mr Andrew Ferguson said prices of commodities are not immune from the financial crisis. But Mr Ferguson said such prices are high compared with a falling equity market.
Mr Ferguson said "We would not cut the price like other iron ore giants last week, adding buyers which are second-tier steel factories, rely on our high quality products. He expects iron ore prices to hover around USD 150 per tonne to USD 160 per tonne for the remainder of the year. The spot price of iron ore slumped to a 12-month low of USD 153.40 per tonne on October 17.”
APAC Resources also said annual production capacity at Mount Gibson, one of the largest listed iron ore producers in Australia will rise to 10 million tonnes from the present seven million tonnes as a new mine, Extension Hill and starts production in the fourth quarter.
sourced TheStandard
APAC Resources is looking for iron ore buyers in Asia to counter the effects of an economic slowdown in the mainland.
The SAR based firm is mainly involved in natural resources investment and iron ore exports to China, where its customers are steel plants in Shanxi, Shandong, Jiangxi and Jiangsu provinces.
Chief executive officer Mr Andrew Ferguson said prices of commodities are not immune from the financial crisis. But Mr Ferguson said such prices are high compared with a falling equity market.
Mr Ferguson said "We would not cut the price like other iron ore giants last week, adding buyers which are second-tier steel factories, rely on our high quality products. He expects iron ore prices to hover around USD 150 per tonne to USD 160 per tonne for the remainder of the year. The spot price of iron ore slumped to a 12-month low of USD 153.40 per tonne on October 17.”
APAC Resources also said annual production capacity at Mount Gibson, one of the largest listed iron ore producers in Australia will rise to 10 million tonnes from the present seven million tonnes as a new mine, Extension Hill and starts production in the fourth quarter.
sourced TheStandard
Xstrata and S Africa union talks fail to end strike
Tuesday, 25 Oct 2011
Reuters reported that global miner Xstrata had met with South Africa National Union of Mineworkers in a bid to end a strike at its coal and alloys operations, but the talks were unsuccessful.
Thousands of workers have been on strike for over a week in protest over an employee share ownership programme.
Mr Songezo Zibi spokesman said "Unfortunately no agreement was reached between the parties and NUM has decided to continue its strike action."
Xstrata last week withdrew its proposed share policy due to the strike and the company said on Monday that the industrial action was now considered illegal and unprotected.
(Sourced from Reuters)
Reuters reported that global miner Xstrata had met with South Africa National Union of Mineworkers in a bid to end a strike at its coal and alloys operations, but the talks were unsuccessful.
Thousands of workers have been on strike for over a week in protest over an employee share ownership programme.
Mr Songezo Zibi spokesman said "Unfortunately no agreement was reached between the parties and NUM has decided to continue its strike action."
Xstrata last week withdrew its proposed share policy due to the strike and the company said on Monday that the industrial action was now considered illegal and unprotected.
(Sourced from Reuters)
JSW Steel bidding for Australian coal miner New Hope - Report
Tuesday, 25 Oct 2011
Bloomberg quoted two people familiar with the plans as saying that JSW Steel Ltd is considering a bid for New Hope Corp the Australian coal producer valued at AUD 5 billion.
According to the people with knowledge of the plan who asked not to be identified because the discussions are at an early stage the company is studying the assets and may make an offer.
One of the people said without giving details JSW will look at ways to raise money to fund the acquisition either on its own or through a venture.
Buying New Hope, based in Ipswich, Queensland state, would give JSW thermal coal mines and an export terminal. New Hope which operates the Acland coal mine in Queensland said on October 5 that selected groups will be invited to submit offers in a process that is likely to take months.
Mr Abhisar Jain an analyst at Centrum Broking Pvt in Mumbai said “The New Hope asset is very big and will help the energy unit of JSW to secure raw material. It will be a huge task for someone like JSW to raise money for such an asset.”
(Sourced from Bloomberg)
Bloomberg quoted two people familiar with the plans as saying that JSW Steel Ltd is considering a bid for New Hope Corp the Australian coal producer valued at AUD 5 billion.
According to the people with knowledge of the plan who asked not to be identified because the discussions are at an early stage the company is studying the assets and may make an offer.
One of the people said without giving details JSW will look at ways to raise money to fund the acquisition either on its own or through a venture.
Buying New Hope, based in Ipswich, Queensland state, would give JSW thermal coal mines and an export terminal. New Hope which operates the Acland coal mine in Queensland said on October 5 that selected groups will be invited to submit offers in a process that is likely to take months.
Mr Abhisar Jain an analyst at Centrum Broking Pvt in Mumbai said “The New Hope asset is very big and will help the energy unit of JSW to secure raw material. It will be a huge task for someone like JSW to raise money for such an asset.”
(Sourced from Bloomberg)
Nimble FMG puts pressure on larger rivals in iron ore race
Tuesday, 25 Oct 2011
It is reported that the push to quickly ramp up iron ore production in Western Australia vast Pilbara region is very much a race between the nation three big iron ore miners Rio Tinto, BHP Billiton and Fortescue Metals Group.
The prize for faster expansion is longer access to windfall prices, which will probably fall as new supply emerges. Tonnes brought to market later will get lower prices.
Mr Nev Power CEO of Fortescue said "The sooner you can bring more volume into the market, the sooner you enjoy the high prices and high returns. He said that but every tonne that comes into the market will start to ease the supply bottleneck and therefore bring the price down."
Mr Power who took the chief executive job from Fortescue founder and major shareholder Andrew Forrest in July is continuing a strategy already in place when he joined. He said that "Our current strategy is very much about taking the opportunity of this strong demand out of China and responding to that with very rapid development and ramp-up of our projects.”
He added that "We recognize that these opportunities don't last forever and we recognize that the strong growth of China needs to be satisfied. Therefore the primary plank of our strategy has been to get in very quickly and meet that demand and to fuel that growth."
Fortescue has approved plans to triple its production to 155 million tonnes a year by June 2013 and if markets remain strong and it plans to move to 350 million tonnes four years after that.
Fortescue ambition to increase annual production capacity by 300 million tonnes in six years compares with BHP's plan to grow by 200 million tonnes to 350 million tonnes a year in eight years and Rio plan to add 100 million tonnes to 333 million tonnes in four years.
sourced TheAustralian
It is reported that the push to quickly ramp up iron ore production in Western Australia vast Pilbara region is very much a race between the nation three big iron ore miners Rio Tinto, BHP Billiton and Fortescue Metals Group.
The prize for faster expansion is longer access to windfall prices, which will probably fall as new supply emerges. Tonnes brought to market later will get lower prices.
Mr Nev Power CEO of Fortescue said "The sooner you can bring more volume into the market, the sooner you enjoy the high prices and high returns. He said that but every tonne that comes into the market will start to ease the supply bottleneck and therefore bring the price down."
Mr Power who took the chief executive job from Fortescue founder and major shareholder Andrew Forrest in July is continuing a strategy already in place when he joined. He said that "Our current strategy is very much about taking the opportunity of this strong demand out of China and responding to that with very rapid development and ramp-up of our projects.”
He added that "We recognize that these opportunities don't last forever and we recognize that the strong growth of China needs to be satisfied. Therefore the primary plank of our strategy has been to get in very quickly and meet that demand and to fuel that growth."
Fortescue has approved plans to triple its production to 155 million tonnes a year by June 2013 and if markets remain strong and it plans to move to 350 million tonnes four years after that.
Fortescue ambition to increase annual production capacity by 300 million tonnes in six years compares with BHP's plan to grow by 200 million tonnes to 350 million tonnes a year in eight years and Rio plan to add 100 million tonnes to 333 million tonnes in four years.
sourced TheAustralian
Rio Tinto blames iron ore price fall on rival Vale
Tue Oct 25, 2011
* Vale shipments to China to blame for soft market - Rio ore chief
* Says move is only a blip, China market fundamentals strong
* Iron ore price down 19 pct this month
PERTH, Oct 25 (Reuters) - World No. 2 iron ore producer Rio Tinto cited a strategy by bigger rival Vale to divert European shipments to China for a dramatic softening in market prices.
Rio's iron ore division head and Australian chief executive Sam Walsh said a move by Vale to ship more to China had not caused Rio to curb its own iron ore production runs, which are running at full capacity.
"The softening in iron ore prices relates to Vale shipping material that was destined for Europe into China," Walsh told a business forum in Perth on Tuesday.
Spot iron ore prices have shed 19 percent so far this month in a sell-off largely fueled by slower construction steel demand in China.
China is the world's biggest customer of imported iron ore, accounting for around 400 million tonnes annually.
In Europe, a more important market for Vale than Rio, steel markets have fallen under a cloud of doubt given its debt crisis.
Growth of Europe's steel production will slow in 2012 along with activity in the steel-using sectors, Eurofer, the European steel producers association has forecast.
Spot iron ore prices on Tuesday fell nearly 4 percent. It was the biggest single-day drop since August 2009 as thin demand from China forced some traders to sell at a loss.
"Traders who can't hold positions because they don't have sufficient funding are selling at a loss of $40-$45 a tonne," said a Singapore-based iron ore trader.
Despite price falls, all three mega-producers including Rio are ramping up production.
"My business is shipping flat out," Walsh said. "We are producing at record rates."
Walsh downplayed the lasting effect of Vale's strategy.
"There's a limit to what they can physically ship," Walsh later told Reuters on the side of the forum. "We're not overly concerned about that."
He said Rio remains confident in the long-term drivers of economic growth and iron ore demand in China.
In the short term, the market was worried about the European crisis, but it was not having a direct impact on Rio's operations, he said.
"The issue is contagion. It's perception, it's fears," he said. "When you look at the fundamentals of China, India, South Asia, North Asia, we find it's very robust."
Vale, the largest of the three top producers, reluctantly discarded the once-a-year-price system in 2010 only after BHP Billiton and Rio bowed out, cognisant it would upset customers. In the end it had no choice but to follow suit.
Now, with spot prices trailing the last quarter's average price mark and lead times on Brazilian cargoes to China much longer than the Australian miners, Vale has announced it is open to alternative pricing systems.
Some analysts have interpreted this as paramount to Vale offering discounted iron ore to boost sales.
sourced Retuers
* Vale shipments to China to blame for soft market - Rio ore chief
* Says move is only a blip, China market fundamentals strong
* Iron ore price down 19 pct this month
PERTH, Oct 25 (Reuters) - World No. 2 iron ore producer Rio Tinto cited a strategy by bigger rival Vale to divert European shipments to China for a dramatic softening in market prices.
Rio's iron ore division head and Australian chief executive Sam Walsh said a move by Vale to ship more to China had not caused Rio to curb its own iron ore production runs, which are running at full capacity.
"The softening in iron ore prices relates to Vale shipping material that was destined for Europe into China," Walsh told a business forum in Perth on Tuesday.
Spot iron ore prices have shed 19 percent so far this month in a sell-off largely fueled by slower construction steel demand in China.
China is the world's biggest customer of imported iron ore, accounting for around 400 million tonnes annually.
In Europe, a more important market for Vale than Rio, steel markets have fallen under a cloud of doubt given its debt crisis.
Growth of Europe's steel production will slow in 2012 along with activity in the steel-using sectors, Eurofer, the European steel producers association has forecast.
Spot iron ore prices on Tuesday fell nearly 4 percent. It was the biggest single-day drop since August 2009 as thin demand from China forced some traders to sell at a loss.
"Traders who can't hold positions because they don't have sufficient funding are selling at a loss of $40-$45 a tonne," said a Singapore-based iron ore trader.
Despite price falls, all three mega-producers including Rio are ramping up production.
"My business is shipping flat out," Walsh said. "We are producing at record rates."
Walsh downplayed the lasting effect of Vale's strategy.
"There's a limit to what they can physically ship," Walsh later told Reuters on the side of the forum. "We're not overly concerned about that."
He said Rio remains confident in the long-term drivers of economic growth and iron ore demand in China.
In the short term, the market was worried about the European crisis, but it was not having a direct impact on Rio's operations, he said.
"The issue is contagion. It's perception, it's fears," he said. "When you look at the fundamentals of China, India, South Asia, North Asia, we find it's very robust."
Vale, the largest of the three top producers, reluctantly discarded the once-a-year-price system in 2010 only after BHP Billiton and Rio bowed out, cognisant it would upset customers. In the end it had no choice but to follow suit.
Now, with spot prices trailing the last quarter's average price mark and lead times on Brazilian cargoes to China much longer than the Australian miners, Vale has announced it is open to alternative pricing systems.
Some analysts have interpreted this as paramount to Vale offering discounted iron ore to boost sales.
sourced Retuers
Monday, October 24, 2011
Falling iron ore prices surprise market players
Monday, 24 October 2011
Spot iron ore prices have slid to their lowest in a year and are set to post their biggest weekly decline in 15 months. The decline in iron ore prices may worsen as the economy slows in China, the largest importer, as the European debt crisis persists and as Australian miners BHP Billiton (BHP) and Rio Tinto Group increase production, analysts have said. According to Macquarie Group analyst Bonnie Liu in Shanghai, iron ore for immediate delivery may drop to $140/mt by the end of the current year.
Weaker demand for steel in China, the world's biggest consumer and producer, has dragged down steel prices and slashed the appetite for iron ore, the key steelmaking raw material. However, iron ore prices have fallen so steeply and so rapidly in the past two weeks, surprising many market players, that most Chinese mills have opted to delay purchases and wait until prices stabilize.
Tags: iron ore , raw mat , steelmaking , steel futures
source steelorbis
Spot iron ore prices have slid to their lowest in a year and are set to post their biggest weekly decline in 15 months. The decline in iron ore prices may worsen as the economy slows in China, the largest importer, as the European debt crisis persists and as Australian miners BHP Billiton (BHP) and Rio Tinto Group increase production, analysts have said. According to Macquarie Group analyst Bonnie Liu in Shanghai, iron ore for immediate delivery may drop to $140/mt by the end of the current year.
Weaker demand for steel in China, the world's biggest consumer and producer, has dragged down steel prices and slashed the appetite for iron ore, the key steelmaking raw material. However, iron ore prices have fallen so steeply and so rapidly in the past two weeks, surprising many market players, that most Chinese mills have opted to delay purchases and wait until prices stabilize.
Tags: iron ore , raw mat , steelmaking , steel futures
source steelorbis
Subscribe to:
Posts (Atom)
Posts
