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Iron Ore Exports
Second Take: Kumba Iron Ore
May 11th
Creamer Media’s Shannon O’Donnell speaks to Mining Weekly editor Martin Creamer about Kumba Iron Ore’s 14% increase in production this year.
Australian Mining Exports to China
May 11th
Australia’s economy has been buffered from the Global Financial Crisis due to our strong exports to China. With Chinese Steel manufacturers starting to run at a loss, will we see a slow down in our exports to China?
China plans to boost steel output by almost 9%
May 11th
China is expected to increase steel supply by 8.6% in 2010 to 621.5 million metric tons, according to a report from the Mysteel consultancy in Shanghai. That will occur, says a report in the official Xinhua news agency, despite an expected increase in domestic prices caused by increased costs of iron ore, coking coal and other steelmaking ingredients.
The need for more steel stems from the multi-billion-dollar, multi-year economic stimulus package that has boosted production of such steel-bearing products as agricultural machinery and equipment, infrastructure construction materials, environmental protection equipment, motor vehicles and emission-reduction equipment. Since the construction of these key projects usually lasts for three years and longer, Xinhua says expanded consumption for such raw materials as steel will continue in 2010 and 2011.
Meanwhile, the Chinese central government has forecast that China’s economy as measured by gross domestic product will grow by between 8% and 10% in 2010. Some private economists put the figure even higher, at more than 10% since Li Yizhong, minister of the China Ministry of Industry and Information Technology, has announced fixed-asset investment growth of 22% this year.
So, with demand for steel expected to boost production in 2010, the China Iron and Steel Association (CISA) expects foreign iron ore miners to call for a 20-30% increase in benchmark iron ore prices in 2010, the official China Securities Journal has reported. This forecast is in line with current market expectations as analysts have said the 2010 Asian benchmark price might inflate on Chinese buys.
However, Luo Bingsheng, vice-chairman of CISA, tells the newspaper that the proposed price rises would \”complicate negotiations” with Rio Tinto and BHP Billiton of Australia and Vale of Brazil. China and the three major seaborne ore suppliers have been at odds for more than a year and actually never settled on a 2009 contract price. Instead, CISA members bought from the three mining firms on spot deals.
Meanwhile, Reuters is reporting that India’s 5% iron ore export tax hike may “tempt Chinese buyers back into a loveless annual relationship with the big three miners,” in preference to the uncertain supply and volatile prices of the spot market. As has been reported on Purchasing.com, India\’s boost of the export taxes on iron ore likely will add $4-$5 a metric ton to the cost of Indian iron ore. Indian exports most of its iron ore to China, which already has been accumulating inventories ahead of 2010 price negotiations with major iron ore miners in Australia and Brazil.
Provided By: http://www.frbiz.com/
Rio to Cut Iron Ore Output 10% as China Demand Slows
May 11th
Rio to Cut Iron Ore Output 10% as China Demand Slows
Rio Tinto Group, the world’s second- largest iron ore exporter, will cut output at its mines in Western Australia by 10 percent because of reduced demand from steelmakers in China (cnmining), following the lead of bigger rival Cia. Vale do Rio Doce.
“This reduction is a prudent move to align production with revised customer delivery requirements in the light of the fourth- quarter drop in Chinese demand,” Tom Albanese, chief executive officer of the London-based company, said today in a statement.
Slowing economies have slashed steel demand, damped prices and in October made mills unprofitable in China, the biggest maker of the metal. BHP Billiton Ltd., the third-biggest exporter of the ore, so far has declined to cut its production or curb expansion.
“Rio is facing reality and I think BHP will inevitably have to say something,” Peter Arden, an analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co., said from Melbourne. Rio’s cuts will reduce earnings “quite significantly”, he said.
Rio Tinto’s shares rose 8.5 percent to A$78.16 at 12:01 p.m. Sydney time. BHP’s shares rose 7.4 percent.
China yesterday pledged a 4 trillion yuan ($586 billion) stimulus plan to prop up growth as the world heads towards recession. The funds will go toward low-rent housing, rural infrastructure as well as roads, railways and airports.
“This will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of economic growth remain sound,” Albanese said in the statement.
Fortescue ShutdownFortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, said today it’s bringing forward a planned shutdown of its port and mine processing plant, reducing production this year by about 10 percent. More normal conditions are expected for next year and beyond, the Perth-based company said.
The world’s largest producers of aluminum, iron ore and steel are cutting output and reviewing investment plans. Brazil’s Vale began iron ore output cuts last month and doesn’t expect a market recovery until next year.
“We have no plans to cut production,” BHP spokesman Peter Ogden said by phone from Melbourne today.
Shipments from Rio’s mines will also be reduced to be between 170 million metric tons and 175 million tons in 12 months ending Dec. 31, the company said, without giving the original figure.
The company produced 145 million tons of ore from its Pilbara mines in Western Australia last year. It had forecast 2008 output of between 190 million and 195 million tons in October. Rio produced 139.2 million tons in the first 9 months of the year.
Cut PricesRio and BHP may be forced to cut prices by 15 percent next year, ending six years of gains, according to the median estimate of 11 analysts surveyed last week by Bloomberg News. BHP, the world’s third-biggest iron ore exporter, is seeking to buy Rio in a hostile $73 billion all-stock takeover offer.
“This is about as bad as it gets,” said Ord Minnett’s Arden. He expects contract prices may fall by 10 percent next year and may decline again the following year.
ArcelorMittal, the world’s biggest steelmaker, last week said it will reduce production by as much as 35 percent in the U.S. and 30 percent in Europe after prices tumbled. The Luxembourg-based company forecast earnings will slide as much as 48 percent to $2.5 billion in the fourth quarter.
Provided By: http://www.cnmining.org
High Cost of Shipping Iron Ore
May 11th
Dryblower on the high cost of shipping
IF HE was alive today the late Lang Hancock, father of the Australian iron ore industry, would be sharing a jolly good laugh with Dryblower over the curious case of Fortescue Metals Group and its trouble with ships.
Neither Lang nor Blower would be laughing at FMG, or its founder, Andrew Forrest. Both would be enjoying the way history repeats itself, and how generations of Australian bulk commodity exporters make the same mistakes.
The common thread linking Forrest and Hancock is that both fell in love with the geology of their mineral claims, and both struggled to get the right answer from the shipping component of their business.
Hancock, a man with many traits similar to Forrest, was so determined in the 1960s and ’70s to create a world-class iron ore exporting business without any external assistance that he organised the supply of railway rolling stock from Romania and a shipping deal with a Norwegian shipping company – before he had a mine, or a railway.
The end result was disaster. The Romanian railway equipment was of such poor standard that it never rolled anywhere in Australia while the shipping contract was in a form of “take or pay” arrangement which meant that, even though nothing was shipped, the Hancock family had to pay.
Settling her father’s messy shipping deals was one of the personal mountains that Gina Rinehart was forced to climb before she could move ahead with her inheritance – a vast swath of geologically rich mineral claims across Western Australia’s Pilbara region and Queensland.
What’s so interesting about the Hancock family’s problems with shipping, and the need to eventually pay many millions of dollars for a service never used, is that FMG some 20 years later appears to have fallen into the same hole.
In both cases the issue is not a question of iron ore in the ground, or problems with finding a buyer for the ore. It’s all about the tricky business known as “transport economics” and finding a formula that enables a bulk commodity exporter to profit through the high and low points of ship-hire costs.
In essence, the Hancock and FMG experiences are lessons in how geology plays second fiddle to transport costs in bulks – something all wanna-be iron ore miners and would-be investors should note.
There are differences between the Hancock and FMG experience, but only at the margin. The most obvious is that Hancock never shipped anything, whereas FMG is exporting ore.
Hancock’s attempted defence in the face of a large bill from the Norwegians was that external events precluded him from getting ore to the port. His problem was that the contract provided no such escape clause.
FMG’s defence over its ending of shipping contracts is that events have changed, primarily that the cost of shipping a tonne of iron ore from the Pilbara to China has fallen from $US45a tonne to $US5 a tonne.
Chinese(cnmining) steel mills, it seems, have argued that they can do the shipping a lot cheaper than what FMG was charging.
Perhaps the Chinese are right. Perhaps FMG has a case to argue. These are matters which will take a long time, possibly years, to sort out.
However, in the back of Dryblower’s mind is that piece of Hancock history when the late Lang discovered to his dismay that he did not have a mine, railway or port – but had signed a shipping contract.
The cost to his family of that failed shipping deal was very high, probably playing a role in the slow development by Rinehart of her inherited business interests – and eventually leading her into a joint venture with Rio Tinto which handles all the tricky bits of iron ore mining: the transport issues of railways, ports and shipping.
Time, and the legal process, will determine whether FMG is facing a future similar to Hancock/Rinehart but it’s a fair bet that the terms of any contract which involves shipping iron ore from Australia incorporate the lessons of the past.
http://www.cnmining.org
Transformation Of China’s Steel Industry
May 11th
February 18, 2008, CVRD announced an agreement this year’s iron ore price up 65% over the previous year. China’s total iron ore imports this year will exceed 400 million tons, such as the figure of China’s steel enterprises in the fiscal year 2008, the cost will rise by more than 100 billion U.S. dollars. As the world’s largest iron ore importer, why do we often lack the pricing power of discourse?
In late January 2008, the Brusselsbased International Iron and Steel Institute (IISI) recently released: 2007 to 489 million tons, China has once again become the world’s largest producer of crude steel production. China’s crude steel production is not only the world’s first, and the production of more than the sum of the second to eighth, accounting for 36.4% of global production in 2006, compared to 33.8% in 2005 to 31% in 2004 to 26.2%, showing increasing trend year by year.
China’s steel output held steady first in the world more than a decade. This 30year reform and opening up, China’s iron and steel industry has made considerable progress, has become the world’s largest steelproducing countries, not only for the sustained, healthy and stable development of materials provides a strong support, but also for the world steel market the prosperity and stability has made a great contribution.
However, in the steady development, China’s iron and steel industry has also been growing pressure: how to deal with excess production side of ordinary steel, the other side need to be imported from abroad every year nearly 20 million tons of high valueadded steel embarrassment? How to deal with the world’s largest importer of iron ore pricing, the right to speak but they often lack the dilemma? How to deal with the domestic water, coal, increasing scarcity of resources in reality? How to deal with the environmental capacity is nearly saturated the “inhibition”? Obviously, this series of question marks have been involved not just one aspect of the industry.
Sounded the assembly number
China’s steel output up to 400 million tons of iron and steel enterprises have up to 1000, only one in Tangshan City, there are 56 iron and steel enterprises, more than the sum of iron and steel enterprises across Europe! Decentralized management system caused by a low degree of industrial concentration has been one of China’s steel industry ills.
In 2006, China’s top five steel producing iron and steel enterprises accounted for only 24.8% of the national total output than in 2000 to reduce by 10.6 percentage points; iron and steel industry leader Baosteel’s 2005 output of 22.73 million tons or so, just of the national total 7.8%. The steel industry in China, the degree of concentration to fall at the same time, the international steel giants are busy rushing about in the strongstrong big wave of consolidation: the world’s largest steelmaker Mittal and the world’s second largest steelmaker Arcelor in the in 2006 merged to become across Europe, Asia, North America, South America, Africa, on five continents, the steel production capacity of about 120 million tons, accounting for about 10% of the global market of the superjumbo; India’s Tata Group and the Brazilian National ferrous metallurgy began his Europe’s second largest steel companies in bidding battle for the British Hekelusi; Japan, Brazil stepped up the pace of domestic iron and steel industry consolidation, such as Nippon Steel and Sumitomo Metal accelerated the consolidation and reorganization of the defensive.
Not only reduces the low degree of concentration of China’s iron and steel enterprises in international competition, economies of scale and technological research and development competitiveness, but also in the same resources, is difficult to import foreign, have lost their pricing, the right to speak, seriously damaging the interests of the domestic industry.
To import iron ore, for example 20042006, China’s share of world imports of iron ore, iron ore exports increased from 1 10 to 1 3, the world’s new iron ore exports of 60% or more were China absorbed. Chinese steel production dependent on imported iron ore from the mid90s last century, 25% to the current 55%. In the meantime, the world’s three major iron ore companies have a monopoly of about 70% of the world’s resources of iron ore trade. In 2005 China’s steel enterprises and the international iron ore giant Vale do Rio Doce (CVRD), BHP Billiton (BHP) and defeated the negotiations, in the absence of any power under any defense accepted by the other 71.5% price increase request, the Chinese iron and steel enterprises were paid as high as 57 billion in additional bills. According to industry sources, Rio Tinto in January 2008 to the Chinese market, sales of one million tons of iron ore spot prices up to 185 ~ 190 U.S. dollars ton, higher than longterm contract price of 120%. BHP Billiton, CVRD also called on China’s exports of iron ore prices by 70%. Capacity of the international iron ore suppliers and the high concentration of China’s domestic steel production capacity of high dispersion in sharp contrast to China, as the world’s largest iron ore importer is in pricing right to speak on the pale.
It is noteworthy that China has in the “iron and steel industry development policy” clearly stated: “By 2010, iron and steel smelting more substantial reduction in the number of firms, the domestic steel top 10 enterprise groups, the country’s total steel output of the ratio of output to reach 50 % or more by 2020 over 70%. ” With the Anshan and Benxi Iron and Steel, Shougang and Tangshan Steel and so the rapid restart the joint can be said that China’s steel industry, the assembly number is sounded.
And strive to “good” word at the head
In addition to muchneeded adjustment of industrial concentration, the Chinese iron and steel industrial structure has become urgent. Not long ago, Hangzhou, a famous hotel than engage in an external wall decoration, drawn from Spain using a 3 mm steel plate imported a total of more than 70,000 cubic meters, to spend up to 100 million yuan RMB … …
China from 2003 to 2007 just five years, new steel production capacity nearly 250 million tons, has become the world’s largest steel exporters. At the same time, China has to import every year a large number of highquality steel, with an average import price in 1100 U.S. dollars per ton or more, while China’s average export price of steel is only 680 U.S. dollars? Further point of view, China’s exports is the largest iron and ferroalloy and nonalloy steel primary products, the product of a lower level of processing; imports most is the degree of processing depth, high technical content of the plate. In contrast, the product structure is irrational, consumption of large, lowgrade and low added value, lack of competitiveness is very clear that China’s steel industry faces an urgent structural adjustment pressures.
For industrywide high energy consumption, serious pollution, process equipment, poor and backward production capacity accounts for about 30% of total capacity of this situation, the Chinese Academy of Engineering, honorary president of Chinese Society for Metals Yin Yu pointed out that the next 10 to 15 years, China Iron and Steel Industry Products structural adjustment and optimization, it should be focused on capital investment sheet products, in particular, including automotive panels and coldrolled silicon steel sheet, etc., highend products. Promulgated by the state, “Steel Industry Development Policy” also made clear that China’s steel industry will control the overall growth and promote technological upgrading and industrial layout, changes in product structure adjustment, new capacity will be combined with the elimination of backward production capacity, in principle, is no longer a significant expansion of steel production capacity.
At present, China included in the scope of blast furnace and eliminate backward production capacity of 99.8 million tons, this part of the phasing out of inefficient capacity will upgrade the industrial structure of China’s steel industry, to provide protection.
Energysaving emission reduction of the iron and steel industry is not responsible for the bottleneck
China’s steel output held steady first in the world more than ten years for such a world “first”, the National Development and Reform Commission Industry Xiong Bilin, deputy director of calculations: in 2006 the added value of China’s steel industry, 3.14% of total GDP , while those consuming more than 300 million tons of standard coal, accounting for about 15% of energy consumption; consumption of fresh water to nearly 40 million tons, accounting for the total industrial consumption of fresh water 14%; iron and steel industrial dust emissions by up to 1.2 million tons, accounting for 14% of industrial emissions; sulfur dioxide emissions by 1.42 million tons, accounting for 6% of total emissions.
Large iron and steel industry is energy consumption, China’s pollution control still uses the total amount of means of control, the environmental capacity of the pressure of a huge iron and steel industry. But precisely because of the huge consumption of energy, making energysaving emission reduction iron and steel industry, shutting down and eliminate backward steel production capacity of China’s special significance: a year, saving more than 5000 million tons of standard coal, watersaving 100 million tons, reducing sulfur dioxide emissions from more than 40 million tons.
SASAC was formally issued in January 2008 entitled “On the central enterprises to fulfill their social responsibility guidance” document, the first time clearly pointed out that enterprises in the creation of wealth, but also bear the social needs of the other responsibilities. Energysaving emission reduction, for China’s steel enterprises have not only the task, it is share of responsibility.
According to statistics, in 2007 the first 5 months of the focus of a comprehensive energy consumption per tonne of steel and mediumsized iron and steel enterprises 626.86 kilograms of standard coal ton, down 4.4%, the comparable energy consumption per ton steel 605.76 kilograms of standard coal ton, down 5%, fresh water consumption per ton steel 5.5 tons ton, down by 19.2%. Efflux 9.42% decrease in total waste water, smoke and dust fell 6.5%, industrial dust fell 2.9%. This can not but said it was a welcome change.
Provided By: http://www.himfr.com/
