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Iron ore - supply and demand rides again
Topic Started: 30 May 2014, 03:23 PM (44,280 Views)
Foxy
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Zero is coming...

http://www.smh.com.au/business/production-glut-from-majors-forces-atlas-iron-to-sell-iron-ore-close-to-a-loss-20140724-zwfzz.html

Did he say pain???
Peter
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Ex BP Golly
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Mustapha Mond
25 Jul 2014, 01:23 AM
No end in sight either

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."

 https://www.commbank.com.au/corporate/research/commodities/daily/commodities-daily-alert.html


Did I hear someone say $65?

What thinks ye Tummy?
Edited by Ex BP Golly, 25 Jul 2014, 10:09 AM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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newjez
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Ex BP Golly
25 Jul 2014, 10:07 AM
No end in sight either

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."

 https://www.commbank.com.au/corporate/research/commodities/daily/commodities-daily-alert.html


Did I hear someone say $65?

What thinks ye Tummy?
A trading range of 80/100 seems reasonable for now. Sadly this spells disaster for a few aussie mines.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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John Frum
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newjez
25 Jul 2014, 01:55 PM
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.
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newjez
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John Frum
25 Jul 2014, 09:20 PM
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?
Yep, built on foundations of salt. She'll be right, as long as it doesn't rain.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Foxy
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Zero is coming...

http://www.theaustralian.com.au/business/in-depth/juniors-will-have-to-slash-price-to-export-lowgrade-ore-walsh/story-fnivd8cj-1226999271092


$14 to go for some.

But hey the government can subsidise the iron ore miners??

The car manufactures.

The horse racing.

The coal industry.

The oil and gas industries.

The wine industry.

The ..................... Housing industry.
(FHB)
(Negitive gearing).

The ..................... You get the picture.

Onwards and upwards comrade, the socialist utopia is yours for the taking.

Peter


http://www.themercury.com.au/iron-ore-price-drops-below-us95/story-fnj3twbb-1226999556956

Super intelligent.

Run harder.

20% discounts??

$65 here we come.

Peter
Edited by Foxy, 27 Jul 2014, 01:26 AM.
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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!
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miw
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newjez
25 Jul 2014, 01:55 PM
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™
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newjez
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miw
28 Jul 2014, 03:07 PM
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?'
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Foxy
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Zero is coming...

https://reiwa.com.au/home/default.aspx?searchtype=ressale


Property Sales for Perth
Last Week
Housever Unitsver Landver Total
hrhr
543ver134ver68ver745
4 weeks agover967
Same week last yearver678

Top Selling Suburbs
North of Riverver South of River
hr
Balga
Butler
Maylands11
8
8verArmadale
Rivervale
Canning Vale18
13
11

Property Listed For Perth
Listed For Sale
Housever Unitsver Landver Total
hrhr
6,581ver2,594ver1,52410,699
4 weeks ago10,938
Same week last year9,088

Listed For Rent6,018
4 weeks ago5,827
Same week last year4,108

3 Months to June 2014
Median Rent: $450/wk
Vacancy Rate: 4.1%

Source: reiwa.com data

Please note the vacancy rate at the bottom of the column 4.1%, this appears higher than any number i have seen so far.

Would the declining iron ore price have anything to do with this??
Peter
Edited by Foxy, 29 Jul 2014, 12:19 AM.
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