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Iron ore prices hurtle to a seven-year high, coking coal prices lag on quotas – Hellenic Shipping News

For the key steelmaking ingredients of iron ore and coking coal, it was a tale of two different markets this week.

The price of iron ore punctured the $US120 per tonne ($164.70/tonne) barrier this week, its highest since early 2014

This was on account of a stronger market for steel in China which is targeting massive investment in its infrastructure.

For the 62 per cent grade iron ore fines product, spot prices were transacting around $US121.75 per tonne, according to Metal Bulletin.

A week ago, iron ore cargoes delivered to ports in China were trading around $US116.85 per tonne, the price reporting agency said.

There are market indications that China’s demand for iron ore will remain strong over the course of the economic cycle.

A dozen Chinese steel companies have struck long-term supply agreements with Fortescue Metals Group (ASX:FMG).

The deals were agreed on the sidelines of the China International Import Expo and included FMG shareholder, Hunan Valin Iron & Steel Group.

Other steel firms in China such as Baotou Iron & Steel Group, and Rizhao Steel also signed agreements for FMG’s iron ore.

“China’s steel industry continues to outperform expectations, with crude steel production in the nine months to September 2020 reaching 782 million tonnes, and annual steel production expected to exceed 1 billion tonnes in 2020,” FMG chief executive Elizabeth Gaines said.

Prices for steel products in China climb on rising demand

Steel product prices in China are starting to rise, as are futures prices for hot rolled coil and reinforcing bar in China.

The price of steel reinforcing bar (rebar), which is used in construction and concrete, rose to $US605 per tonne, this week.

This is up $US22 per tonne on a week ago, according to reports.

Fresh environmental restrictions on steel plants in Tangshan are also creating demand for higher-grade iron ore.

Higher quality iron ore commands a higher price in the seaborne market, and the cost flows through the supply chain to consumers; in this case, steel mills in China.

Iron ore shipments to China are on a roll

China’s imports of iron ore increased in October to 106 million tonnes, representing a rise of 15 per cent on-year.

“China’s demand for iron ore imports has increased on the back of strong steel demand and positive steel mill margins,” said analysts at Commonwealth Bank of Australia in a report this week.

Beijing has primed its economy with stimulus money to offset a decline in activity from COVID-19 restrictions earlier in the year.

“China’s infrastructure sector has led China’s steel demand growth due to policy support after COVID-19,” said the analysts.

Meanwhile, Brazil’s iron ore shipments to China have started to increase again after hitting a seven-month low.

Vale, the South American country’s largest shipper of iron ore, has plans to increase its exports with new mine projects.

Port-side stockpiles of iron ore in China have risen to 129 million tonnes as of last week…..

Link here to the full Hellenic Shipping News article

Iron ore exports from Brazil hit highest level since 2015 – Mining.com

Brazilian iron ore exports increased 18.5% in September compared to the same period last year, to 37.86 million tonnes, after Vale increased the pace of production. 

The volume shipped last month is the biggest since December 2015, when Brazil exported a monthly record of 39.5 million tonnes, according to the Ministry of Industry, Foreign Trade and Services.

Compared with August, there was a 21% increase in Brazilian iron ore shipments in September.

Vale resumed full operations at its Viga plant on Thursday, after a judge lifted an order that had suspended operations there, the mining firm said in a securities filing.

Vale’s Ponta da Madeira iron ore terminal. (Image courtesy of Vale SA.)

Operations at the iron ore concentration plant had been suspended for six days, the company said, as it rectified alleged issues pertaining to its operating permit.

According to the miner, the halt resulted in 11,000 tonnes per day of iron ore fine production off the market.

Brazil’s iron ore exports – which represent 59% of the country’s mineral production – totaled $5 billion in Q2, 6% higher than Q1 2020, but 5% lower than in Q2 2019. The country exported 76 million tonnes, 8% above the total registered in Q1 2020, but 3% lower than Q2 2019.

Industry group IBRAM projects that the country will export 310 million tonnes in 2020, lower than the 340 million tonnes exported in 2019.

Link here to read the full article

China demand pushes iron ore back above $90 a tonne – Financial Times

Iron ore, the steelmaking commodity that is the main source of income for global miners BHP, Rio Tinto and Vale, broke above $90 a tonne this week for the first time since mid-March, supported by strong demand from China.

The country is the world’s biggest producer of steel and demand for the metal, widely used in construction, has been steadily increasing since Beijing began in late March to ease nationwide lockdowns put in place to contain the spread of coronavirus.

Government data released on Friday showed industrial output in China recovering in April after collapsing during the most intense phase of the outbreak.

Daily crude steel production at big plants in China increased 13 per cent to 2.1m tonnes in the first 10 days of May — the highest level of activity this year, according to brokerage Argonaut Securities.

“The rising steel production didn’t result in an oversupply and price depression as signalled by markets. Rather, steel inventory has quickly declined and steel prices gradually increased,” said Helen Lau, an analyst at Argonaut.

For the week to May 15, total steel inventory in China dropped 34 per cent to 17m tonnes, led by a 37 per cent decline in stocks of steel reinforcement bars, a product widely used in the construction industry.

At the same time as demand in China has been rising, exports from Brazil, a key producer, have stalled because of lower shipments from Vale’s operations in the Amazon rainforest. The cause of the decline is unclear, but analysts said it could be linked to a rising number of Covid-19 cases in the state of Para.

“With China’s crude steel output now at a higher level than a year ago, demand for iron ore is outpacing shipment arrivals. As a result, China’s iron ore port inventories are gradually eroding,” analysts at Morgan Stanley said in a report.

Mike Henry, the chief executive of BHP, told investors this week that if China were to avoid a second wave of Covid-19 infections he expected raw steel production in the country to rise this year, offsetting double-digit declines in the rest of the world. The country accounts for more than 50 per cent of global steel production.

Benchmark ore with an iron ore content of 62 per cent was priced at $93.25 a tonne on Friday, according to an assessment by S&P Global Platts, up 5.4 per cent on the week.

At that price, BHP, Rio and Vale are generating billions of dollars of cash from their iron ore mines.

Analysts said reports China might impose import restrictions on Australian iron ore in retaliation for Canberra’s call for an inquiry into the origins of Covid-19, were probably off the mark.

Beijing has suspended imports of red meat from four Australian abattoirs and is planning to impose punitive tariffs on barley shipments.

“China relies on Australia for over 60 per cent of iron ore imports,” said Glyn Lawcock, analyst at UBS. “With the market tight, Chinese port stocks declining, and Brazilian exports down 12 per cent year to date, options today appear limited.”

Fortescue registers record iron ore shipments – Cadence Minerals

Fortescue Metals Group has achieved a record shipment of iron ore in the December 2019 quarter with 46.4 million tonnes.

This led to record shipments for the first half of the 2020 financial year with 88.6 million tonnes.

Fortescue chief executive Elizabeth Gaines expects shipments at the end of the financial year to be at the upper end of the 170 to 175 million tonne guidance.

“Once again, the Fortescue team has achieved outstanding results, demonstrated by multiple records,” Gaines said.

“Excellent operational performance across all mines, rail and port was maintained to deliver shipments of 46.4 million tonnes, a 9 per cent improvement on the corresponding period last year.”

The news came as Fortescue announced it was set to invest $US450 million ($666 million) into the next stage of its Pilbara energy connect program.

The program, called the Pilbara Generation project, will combine 150 megawatts of gas fired generation with 150 megawatts of solar photovoltaic (PV) generation.

This will be supplemented by large scale battery storage that will be constructed, owned and operated by Fortescue.

The Pilbara Generation project complements Fortescue’s existing $US250 million Pilbara transmission project announced last October, which will provide low cost power to the Iron Bridge magnetite project in the Pilbara region of Western Australia.

Together, the transmission and generation projects will provide Fortescue with a hybrid solar gas energy solution that will deliver low cost power to Iron Bridge.

Fortescue also came into an agreement with Alinta Energy last year to build the Chichester solar gas hybrid project.

It will see up to 100 per cent of daytime stationary energy requirements of the Chichester Hub iron ore operations in the Pilbara powered by renewable energy.

Gaines said this US$700 million commitment to electricity generation and transmission infrastructure would significantly slash carbon dioxide equivalent (CO2e) emissions.

“The modelling indicates by installing 150 megawatts of solar PV we will avoid up to 285,000 tonnes of CO2e per year in emissions, as compared to generating electricity solely from gas,” she said.

“Pilbara energy connect allows for large scale renewable generation such as solar or wind to be connected at any point on the integrated network, positioning Fortescue to readily increase our use of renewable energy in the future.”

Link here to view on the Australian Mining website

These record iron ore numbers are also indirectly driving recommissioning activities among previously mothballed iron ore mines.

In NE Brazil, a jv between AIM listed Cadence Minerals #KDNC and Singapore based commodities group IndoSino Pte Ltd will see the former Anglo American (AAL) and Cliffs Natural Resources owned Amapá iron ore project recommissioned.

With key rail concessions granted to Cadence for shipping in December, this large-scale iron open pit ore mine with associated rail, port and beneficiation facilities is expected to produce 5.3 million tonnes of iron ore by 2024.

FT – Iron ore outlook rests on Vale’s tricky rebound

Iron ore outlook rests on Vale’s tricky rebound

by Neil Hume, Natural Resources Editor. Jan 16th 2020

Shareholders are revelling in bumper payouts, but prices could fade down the track.

Shareholders in Rio Tinto are likely to be celebrating another bumper payout when the miner reports annual results next month. The Anglo-Australian group — along with rivals BHP and Brazil’s Vale — is generating bucket loads of cash from the continued strength of iron ore.

Boosted by strong demand from China and a string of supply disruptions the key steelmaking ingredient rose 30 per cent last year and averaged $90 a tonne.

For big producers such as Rio that can mine the material for as little as $15 a tonne, that means windfall profits — and sturdy dividends for investors. Deutsche Bank reckons Rio generated close to $10bn of free cash flow last year.

Whether it can match that performance in 2020 will depend on the direction of iron ore prices.

The good news for its shareholders is that prices have remained elevated over the past month, trading at more than $90 a tonne as Chinese steelmakers have restocked ahead of the Lunar New Year holiday that starts on January 25, and the start of the spring construction season.

The risk of weather disruptions in the Pilbara — Australia’s main iron ore-producing region — has also kept prices firm, according to traders. A sharp fall in exports from Brazil because of lower shipments from Vale, the world’s biggest iron ore company, has helped too.

One final boost: the decision of the US Treasury to drop the designation of China as a currency manipulator. This has lifted the renminbi, making cargoes of iron ore cheaper for Chinese mills to buy in the seaborne market.

Still, most analysts expect prices to drift lower over the course of the year, as supply picks up and production in China remains broadly flat at close to 1bn tonnes.

Demand is likely to fade after China’s new year holiday, according to BMO Capital Markets. It reckons restocking has finished, pointing to a slowdown in activity at the main iron ore port in Hebei, China’s leading steelmaking province.

Ultimately, the direction of prices will hinge on Vale and whether it can hit targets for production.

The company was forced to cut more than 70m tonnes of capacity last year after a dam disaster at one of its mines in the state of Minas Gerais in which more than 250 people died.

Some of the supply has come back online and this year Vale expects to produce between 340m and 355m tonnes of iron ore, up about 40m from last year. However, no one is sure if the Brazilian miner can actually do that. Some of the shuttered output uses dams that have to be decommissioned before production can resume, for example.

If Vale hits guidance JPMorgan estimates the iron ore market could be in surplus, with supply outstripping demand by 28m tonnes. If it does not, then Rio, its shareholders and other big producers could be celebrating another year of elevated prices.

Link here for full FT article

The squeeze is also seeing some recommissioning activities among previously mothballed iron ore mines.

In NE Brazil, a jv between AIM listed Cadence Minerals #KDNC and Singapore based commodities group IndoSino Pte Ltd will see the former Anglo American (AAL) and Cliffs Natural Resources owned Amapá iron ore project recommissioned.

With key rail concessions granted to Cadence for shipping in December, this large-scale iron open pit ore mine with associated rail, port and beneficiation facilities is expected to produce 5.3 million tonnes of iron ore by 2024.

#KDNC – Supply Disruptions Raise Morningstar Near-Term Iron Ore Price Forecasts

A STOCK STRATEGIST INDUSTRY REPORTS by Mathew Hodge

Near-term tightness in the iron ore market has persisted and intensified, with several developments in Brazil further restricting  Vale’s (VALE)supply and Cyclone Veronica off Australia interrupting Pilbara shipments. We’ve factored in a reduction of another 20 million tonnes in Vale’s output in 2019 and 10 million tonnes in 2020. We now expect Vale to produce 350 million tonnes in 2019 and 370 million tonnes in 2020, down from an estimated 390 million tonnes in 2018. For  Rio Tinto (RIO),  BHP (BHP), and Fortescue, we’ve lowered our forecasts by 10 million tonnes in total for 2019 due to the cyclone. The estimated 30 million tonnes of lost supply from Vale and the Pilbara in 2019 is a more than 1% reduction to the seaborne iron ore market.

Disruptions mean that higher-cost iron ore is needed to balance the market, such as from domestic mines in China. The iron ore price has averaged $83 per tonne year to date, well ahead of our prior $65 per tonne forecast for 2019. Accordingly, we are raising our near-term iron ore forecasts to $73 in 2019, $60 in 2020, and $50 per tonne in 2021. Our prior forecasts were $65 in 2019, $55 in 2020, and $40 per tonne in 2021. Our unchanged $40 per tonne long-term forecast now starts a year later, in 2022.

All major iron ore miners we cover benefit from the higher price forecasts, including Vale. However, for Vale, there’s uncertainty around the cost to rectify the Feijao dam failure and compensate the victims as well as legal action that may affect the operation of other mines. Fortescue benefits most because it’s an iron ore pure play and has lower margins than BHP or Rio Tinto, which brings greater leverage to the price.

We’ve not changed our $40 per tonne long-term forecast, given the relative flatness of the iron ore cost curve inside the steep tail of smaller-scale and marginal producers, most which we eventually expect to exit. Disruptions to Vale’s supply should resolve within the next few years. In terms of iron ore supply additions, the lost output from Vale, including Samarco, should come back in the medium term. The S11D project should also expand to reach capacity over the next few years. BHP and Rio Tinto should grow modestly as those companies reach their installed capacities.  Anglo American’s (NGLOY) Minas Rio mine in Brazil should add more than 20 million tonnes per year after being shut to rectify slurry pipeline leaks. Most of the additional output from Anglo will come in 2019. From a disrupted 2019 base of about 350 million tonnes, we expect Vale’s output to grow to around 425 million tonnes a year from 2023…..

Link to Morningstar for full article here

Why The Panic ? Ask Ye Not.

This year copper has fallen a further 17%. Last week it traded at $2.30 per lb. having fallen 5% in just two weeks. Poor German manufacturing data led to a fall of 3.1% in one day alone

.But things are changing. Chinas manufacturing index has risen off its August lows. This year supply and demand for copper are expected to be back in balance whilst in 2016 there is expected to be a deficit of 130,000 tonnes, growing over the next 12 years to an expected annual shortage of 10m. tonnes.

Gold fell by 6% in five days, back below the magic $1100 per oz, after Janet Yellen said there was a distinct  possibility that US interest rates would rise in December. The dollar  has already risen 11.3% this year. Obviously Yellen has not a clue about the damage which vague statements and talk of possibilities can do when they are issued by the Fed.

The result is that hedge funds are now ready to sell 430 tonnes of gold and the share of Goldcorp, the worlds largest gold miner have fallen to $11.65, the lowest since 2004.

Steel prices in China dropped to near record lows, down 7.6% in a month. China forges 46% of the worlds steel and consumes more than 75% of the worlds sea borne iron ore trade. Except for a tiny, tiny fall so far this year, which is expected to have righted itself by the end of the year, Chinese iron ore consumption has  risen six fold since 2000. It has not fallen once in any year since 2000.

So why the panic ?

The three big Australian ore miners are doing enormous damage – but only to themselves, although they are too thick to realise it. They  raised output and cut prices in the middle of a so called slump and and also cut costs, hoping they would bankrupt the competition but the cost cutting was not enough to make up for the price cuts and to make matters worse the competition joined them with increased output and lower prices.

Why the panic ? Ask Vale, Rio Tinto, BHP Billiton and Janet Yellen – they seem to be experts at creating it.

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