India is going to ramp up production. Soon back above 100MT a year, with no artificial restrictions on exports. Dig baby dig!
" India’s Minister of State for Steel and Mines has informed the country’s parliament that the new government does not have any plans to restrict India’s export of iron ore, as domestic production is sufficient to meet both domestic consumption and allow exports. India’s exports of iron ore have collapsed from ~110Mt in 2009 to ~15Mt last year, providing support for seaborne iron ore prices. A resumption of iron ore exports from India will weigh on the iron ore market (and iron ore prices) at a time when many saw the market as already being in oversupply."
India is going to ramp up production. Soon back above 100MT a year, with no artificial restrictions on exports. Dig baby dig!
" India’s Minister of State for Steel and Mines has informed the country’s parliament that the new government does not have any plans to restrict India’s export of iron ore, as domestic production is sufficient to meet both domestic consumption and allow exports. India’s exports of iron ore have collapsed from ~110Mt in 2009 to ~15Mt last year, providing support for seaborne iron ore prices. A resumption of iron ore exports from India will weigh on the iron ore market (and iron ore prices) at a time when many saw the market as already being in oversupply."
A trading range of 80/100 seems reasonable for now. Sadly this spells disaster for a few aussie mines.
The decline certainly seems more structural this time compared to a couple of years ago.
Still, at least we've got those big banks to power our economy through the tricky times, eh?
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Mining by its very nature is very cyclical, as Mackenzie noted back in the early 1980′s (before China) that a one or two percent change in global GNP resulted in in a double digit change in demand and then up to a sub-order increase in price (e.g. nickel boom in the late 1960′s). Hence big mining companies are historically very, very hesitant about building new projects, in particular, in numerous commodities, a major new project could mean that the demand supply balance fundamentally changes negatively.
Iron ore is a bit different, but its best not to think of it as a mining venture but a bulk handling exercise, were logistics, not mining is paramount. In reality, its all about costs and transport – hence the reason why BHP and RIO do not bother to drill their iron ore despots substantially, because in many instances, they have decades, sometimes hundreds of years of life in front of them (theoretically).
When dealing with a major logistics exercise, its all about scale, mobility, and in the case of iron ore, rail and port infrastructure. These require detailed logistical planning. I have seen smaller iron ore mines opened in less than three months and truck their product – then slowly ramp up. In some instances, larger mine projects take a year or so. Much the development is earthworks (pre-strip), road, accommodation and relatively simply crushing/screening and processing plants (ignoring magnetite projects – never took off anyway – too expensive). In recent history, trucks, loaders and bulldozers did need time between order and delivery – but not surprisingly, that problem has resolved itself recently.
For a major logistics project, their are contour maps for rail corridors, bridges, rainfall studies, major ordering purchases for sleepers, rail wagons and locomotives. Loading and unloading facilities are usually prefabricated and have relatively long lead times. Ports need dredging and wharfs need building. Not to denigrate mine planning at all – but the logistics side of the equation is substantially more intricate, and therefore, has greater chance of going wrong.
To state the bleeding obvious, even when money is thrown at these projects, by their nature, they take a very, very long time to establish. It used to be on the scale of decades – now only five or six years (which is probably its natural limit).
This also implies a very important point that Tim may have overlooked. Once these plans are approved and put into motion, there is no turning back. Capital is committed, and it rarely ever stopped. Hence the overriding reason why major producers want to be Q1 or possibly Q2 on the cost curve, because margins are only relevant at the C1 cost level. Major projects usually endure a number of major business/mining cycles – hence profit margins are in fact totally irrelevant (critical flaw in Tim’s argument). Construction for a major project can take a number of years to reach nameplate capacity – on top on years of planning, ordering and intense scheduling (even 6-24 months for debt financing for any company other than BHP, Rio and Glencore – although the last has too much debt and is a ticking time bomb).
Iron ore projects that are coming on line over the next couple of years have probably had up to seven or eight years of recent project development at various levels. Many of them will still be in operation in several decades time. Over that period – most (?) will make substantial losses on a total investment basis (hopefully not on a marginal cost basis) for a period of time.
On a totally unrelated point – thats why Australian States have royalties (it gives them something even when things are really tough) – and why Federal Treasury have their budget figures desperately wrong in coming years, when there could be a significant period where absolutely nothing will be received in form of taxable income, from this very important sector.
And given while I am on this soap box – is the reason why the mining tax was always a dud idea because the vast majority of “experts” simply do not understand this industry. Thank God we had Martin Ferguson in the last parliament. A real standout figure and often a lone voice of reason!
A trading range of 80/100 seems reasonable for now. Sadly this spells disaster for a few aussie mines.
But it spells big profits for the mines where almost all the production actually happens.
What it does mean is that no more capacity is required so iron ore will not be providing jobs for geologists and we'll see no new construction for a long time in iron ore mines. In fact I reckon we are close to global peak steel production because to me it looks as if China has about half-finished its big infrastructure surge and the slope from here on is downward.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
But it spells big profits for the mines where almost all the production actually happens.
What it does mean is that no more capacity is required so iron ore will not be providing jobs for geologists and we'll see no new construction for a long time in iron ore mines. In fact I reckon we are close to global peak steel production because to me it looks as if China has about half-finished its big infrastructure surge and the slope from here on is downward.
Although obviously the profits would have been bigger at $180/tonne
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy