They come from Deutsche Bank’s analysts — who have in the meantime suspended their ‘buy’ rating on the London-listed Sierra Leone iron ore miner.
Background: a related party transaction, a director resignation, an internal investigation into $50m of shareholders’ money also paid to a related party, and a four-fifths share-price drop in a year. (And a 25 per stake held by the Shangdong Iron and Steel.) Read more
Deutsche: yes, copper financing in China is big.
How big? Try a tenth of all short-term FX loans — and 750,000 or so tonnes of metal in Shanghai bonded warehouses alone — big.
But then, they think it will mostly stay profitable… Read more
We are, of course, talking about iron ore which has slipped into bear market territory overnight (defined here as 20 per cent fall from a recent high).
It was supposed to be one of the best trades of 2013 – buy mining stocks to get leveraged upside to the global economic turnaround. But as we approach the end of the first quarter, only one half of that equation is working. The world economy is recovering strongly but the big miners are being well and truly left behind – Australian Financial Review.
Yep, the miners as a ‘leveraged play on global growth” is not going exactly to plan: Read more
Having tracked (with some glee) last year’s gut wrenching slide in the iron ore price…
… it’s high time we made a few observations on the recent dizzying ascent of the steel making commodity. Read more
After languishing well below $100 for much of August and September, spot iron ore is back in the $110+ range and not far from the $120 ‘floor’, albeit with a few hiccups of the last couple of days… So what’s going on? Here’s a theory we find plausible. Read more
It’s not a great choice, if you’re in China. From Reuters today is confirmation that Baosteel has suspended production at a Shanghai plant that has capacity to make 3m tonnes a year of steel.
“The government’s infrastructure investment may only improve sentiment … I don’t expect a big lift in steel demand,” Zhang Dianbo, assistant president of Baosteel, told reporters at an industry conference in Dalian on Thursday. Read more
When commentators cast around for reasons to explain the strength of the Australian dollar in the face of falling iron ore and coal prices they all arrive at the same answer - haven bond buying by central banks/ sovereign wealth funds. In fact, we’ve also made that very point.
About that iron ore rally…
Forecasting is a tricky thing. The latest quarterly update from Australia’s Bureau of Resources and Energy Economics predicts iron ore prices will average A$101 a tonne in 2013:
From Martin Malone at Mint Partners…
Behold, some wondrous news for iron ore producers across the globe.
From Business Spectator: Read more
… must come down.
What might the following index looked without the threat of war with Iran and/or the continued existence of the gold bug brigade? Read more
Yep it’s the incredible shrinking iron ore price…
BHP Billiton is taking a step back from its planned $20bn expansion of its Olympic Dam copper and uranium mine — as many had suspected it might.
The company wrote down $346m on its investment so far in the South Australian project. That, combined with writedowns on its North American shale gas assets, led to a 21 per cent decline in its full-year profit after tax. Read more
Here’s a bold call: the developed world’s fastest growing (that’s Australia for those of you at the back of the class) will fall in to recession next year as the China-driven mining investment boom ends.
Given the recent declines in Chinese steel prices and spot iron ore price, Deutsche Bank economist Adam Boyton reckons Australia’s terms of trade (the price of exportable goods divided by price of importable goods) could be 15 per cent lower year-on-year by the fourth quarter. Read more
Where will the new floor be? Iron ore is still falling below the $120/tonne mark…
As low cost producers, with arguably the best resources in the world, it’s little wonder that BHP Billiton and Rio Tinto are shipping as much iron ore as they possible can from their mines in the desolate Pilbara region of Western Australia. Assuming a $7/tonne freight rate, Lex estimates, the landed iron ore price in China would have to fall to $37/t before Rio lost out.
So even with the iron price at a near three-year low of $112 , Rio and to a lesser extent BHP are making a killing and will continue to do so as higher cost producers (mainly Chinese) fall by the way side. Read more
We looked at both steel production and iron ore prices a few times last month, because it became clear that they were not adhering to the “$120/tonne price floor” theory that has been widely accepted for the past couple of years. And… they’re still not.
Nomura’s Matthew Cross and Ivan Lee have produced this chart to underline their argument that one should look to steel profits rather than the iron ore cost curve to predict near-term iron ore prices moves. Which we’d characterise as: it’s problematic to look only at the supply-side in forecasting commodities prices. Read more