Posts tagged Prices
Perth mining financier sees lower iron ore contract prices ahead
One of the leading figures in mid-tier iron ore production in Western Australia, George Jones, believes the big price pushes by the big three – Rio Tinto Ltd, BHP Billiton and Vale – will see a new order over the next 12 months – with contracts being negotiated with the Chinese (cnmining) at lower prices.
The announcement by major Pilbara iron ore exporter Rio Tinto that it would be cutting its production by 10% is expected to be a forerunner of tougher negotiations with Chinese and other Asian steel mills taking the lead.
George Jones who was involved with eastern wheatbelt iron ore miner Portman Mining – taken over by American iron and steel company Cliffs Mining – and now is chairman of Gindalbie Metals Ltd. Earlier this month Gindalbie (ASX: GBG) announced it would raise $A162 million ($US112.5 M) through its joint venture partner AnSteel of China to complete project development financing for the Karara iron ore-magnetite project in Western Australia’s mid north. This would involve a placement of 190,658,824 shares at A85c/share, a 105% premium to the last October quoted price. The last ASX trade today was at A44¢.
On ABC television news tonight Jones said in a brief interview that the high prices sought and gained in the past two years by the majors were now rebounding.
Also today, Australia’s third largest miner OZ Minerals Ltd (ASX: OZL) warned that it was undertaking a “thorough review of all capital and operational expenditures.”
While the company was now commissioning the big Prominent Hill copper-gold mine in South Australia’s far north and is preparing to commission its second autoclave for the Sepon copper plant in Laos “the timing and structure of all other projects is under review.
Managing Director Andrew Michelmore said: “OZ Minerals is in the fortunate position of having a healthy balance sheet, a good cash position and an enviable suite of projects that underwrite the future growth of the Company.”
The picture being painted in the business media in Australia is getting more sobering by the day. This morning’s The Australian newspaper cited reported sackings since early August and the indications in Perth’s stockbroking quarters and the mining hub of West Perth shows job fallout has been more substantial.
The reported job culls include 150 by laterite nickel-cobalt miner and refiner Minara Resources Ltd (ASX: MRE) with another 50 to go, Perilya Ltd (ASX: PEM) cut 440 jobs in Broken Hill, Mt Gibson Iron Ltd (ASX: MGX) will drop one-third of its workforce on iron ore operations in WA, the now European-controlled, Consolidated Minerals has cut jobs at its nickel mining operations at Kambalda and late last week CBH Resources Ltd (ASX: CBH) added 118 job cuts to the 220 dropped in June at its Endeavour lead-zinc-silver mine near Cobar in New South Wales.
What next for China iron ore prices?
The latest research weekly from Macquarie suggest that iron ore contract prices for China(cnmining) in 2009 will be around 20 percent lower than in 2008, copper TC/RC costs are rising and aluminium imports and exports continue to fall.
The 2009 annual iron ore negotiations are approaching, and once again, news headlines are teeming with all kinds of arguments from different iron ore stakeholders. We believe that iron ore contract prices will fall next year, but will not collapse (we are expecting a 20% decline for 2009). Spot business will also be more important in the next year.
Over the past week, steel prices have lost their uptrend momentum. Hot rolled coil prices were unchanged from last week at $456/t ex-Vat, and cold rolled coil prices were down by a slight 0.5% WoW to $543/t ex-Vat. Also, rebar suffered a 0.4% WoW decline to $440/t ex-Vat, and galvanised steel was $548/t ex-Vat, down by 0.8% WoW.
Local spot iron ore prices were unchanged from last week. 66% Hebei iron ore fine stayed at $102/t ex-Vat, while the Indian 63.5% iron ore fine prices increased by $5/t to $80/t cif.
Copper treatment and refining charges (TC/RCs) have strengthened in the spot market along with smelter production cuts in China and collapsing copper prices. We heard the average benchmark TC/RC is sealed at US$80/t and US8.0¢/lb (US20.5¢/lb combined) in the spot market compared with US$45/t and US4.5¢/lb ((US11.5¢/lb combined) quoted in October.
According to the preliminary trade data from China customs, China imported 217,214t of unwrought copper and semi-finished copper products in November, down 6% from October and a 3% drop from the same period in 2007. The October number was the highest since April. For the first 11 months of 2008, total imports were down by 8.0% YoY to 2.35mt.
Chinese unwrought aluminium exports, including aluminium alloy, kept falling in November to 30,396t (lowest level in 2008), a 36% fall MoM and a 32% drop from the same period in 2007. The combination of lower prices and the introduction of a 15% customs duty on aluminium alloy exports, effective 20 August, has severely affected Chinese aluminium exports.
Chinese aluminium imports also declined. The provisional data from China are for imports of aluminium, alloys and semi-fabricated products combined, and thus are not directly comparable with the export figures. These data show imports falling from 66,000t in October to 54,500t in November. Allowing for an estimated 40,000t of semis imports (down from 45,400t in October), this would imply imports of aluminium and alloys of around 14,500t in November.