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Iron ore - supply and demand rides again
Topic Started: 30 May 2014, 03:23 PM (44,270 Views)
Massive
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Well impressed you got there so quickly miw .. Mind u if it was in shanghai I would have been there with bells on ... Definitely on my Beijing bucket list for whenever I pass through again

Not a bad price .. Shangri La here charges similar for quality buffet and great thanksgiving buffet at Marriott is also in same bracket
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Poontang
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There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Bardon
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Poontang
8 Sep 2014, 12:13 AM
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I am off to Doha on Thursday I will make sure to post a picture of my lobster mornay fully prepped and placed back in the shell ready to eat!

I will also post the cost, maybe there should be a lobster index similar to the global Big Mac Index.
Edited by Bardon, 8 Sep 2014, 09:24 AM.
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Foxy
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Zero is coming...

https://www.youtube.com/watch?v=IyTAhtNbiKs

With iron ore prices dropping by the day we will need to see a how low can you go comp between Gina and Clive on iron ore prices.

Peter will be fun to watch from my https://www.youtube.com/watch?v=IyTAhtNbiKs reality.

http://www.reuters.com/article/2014/09/08/china-steel-home-idUSL5N0R92RY20140908?feedType=RSS&feedName=rbssEnergyNews

Go girls.

https://www.youtube.com/watch?v=s418sn3pjKc

And they mentioned the S and D words.noooooooooooo
Edited by Foxy, 9 Sep 2014, 12:16 AM.
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Foxy
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Zero is coming...

http://www.theaustralian.com.au/business/opinion/if-recessions-werent-abolished-we-might-have-one/story-fng7vg0p-1227053499825?nk=e798ddd64513e50f47bc9a87b7e19747

I will make this really simple for you.

Daddy is not giving you an allowance anymore.

The money has been cut.

So all your little dreams are going to come crashing down.

No cash cow no lollipops.

Come on dumb dumbs you can work it out.

Peter

150 is a number.
http://www.macrobusiness.com.au/2014/09/goldman-cuts-iron-ore-forecast-into-the-70s/

Have they been talking to Foxbat???????

$65 per ton here we come.

Peter

Goldman cuts iron ore forecast into the 70s
Posted by Houses and Holes in Commodities, Iron ore price at 9:24am on September 10, 2014 | 0 comments

The big sell side bear just can’t stop growling:

gs

The price decline has come sooner than expected
We have consistently argued that, in an oversupplied iron ore market, low prices would be required to force the closure of marginal production both in China and overseas. Although sooner than anticipated, our expectations of lower prices have materialized, with the spot price down 38% ytd to US$84/t. The price decline has been dramatic, but a weak demand outlook in China and the structural nature of the surplus make a recovery unlikely. In our view, iron ore has already transitioned to an exploitation phase where the commodity prices are typically subject to the deflationary pressure of mining productivity and the depreciation of commodity currencies. We maintain our US$80/t forecast for 2015 and we apply our updated assumptions on cost deflation by lowering our 2016-17 forecasts to US$79/78/t (down 4%, 8% respectively).

When the irrational is rational: why prices undershoot
Prices in the year to date have underperformed relative to the consensus expectations of a soft landing. In our view, this illustrates the shortcomings of global cost curves as a tool to forecast iron ore prices. The lack of adequate data on Chinese supply is a well-known challenge, particularly now that NBS statistics on production volumes send confusing signals; on balance, we believe that Chinese supply on the upside on the back of ongoing expansions that will partly offset the loss of marginal mines. Moreover, prices tend to undershoot in oversupplied markets because marginal producers have a strong financial incentive to delay mine closures even when they operate at a loss. Far from being an irrational decision, we argue that this behavior simply reflects the costs associated with idling an asset and the associated loss of option value.

Chinese mines and stockyards not enough to balance market
As the market falls deeper into surplus, excess iron ore can only be absorbed via an increase in inventory and/or the displacement of marginal production. Since the start of the year, stockpiles at Chinese ports have seen a 23Mt increase, while low prices have forced the closure of c.48Mt in grade-adjusted Chinese and seaborne production capacity. Each of these safety valves will be tested further, in our view, but stockyard space is finite and port restocking should play a more modest role from 2015 onwards. We believe this will leave Tier 2 seaborne producers increasingly vulnerable, with up to 40Mtpa in seaborne capacity at risk of closure in both 2015 and 2016.
Edited by Foxy, 10 Sep 2014, 10:33 AM.
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Lou Ellen
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Iron ore is going to $70 sooner rather than later. The oversupply in the market is big but is headed for huge, somewhere between 200 and 300 million tonnes per annum (mtpa) capacity within eighteen months. To balance the market, roughly two-thirds of the rationalisation is going to come from seaborne supply. That means a lot of Australian production is going to close, along with assorted international high cost producers.

The largest marginal supply in the global seaborne market is Fortescue Metals Group (150mtpa). It’s cost of production is likely to form the price floor as the global shakeout transpires, somewhere around $70.

Owing to bulk commodity contract pricing, the real price falls for Australian miners lag spot markets by three to six months. Much of the price falls for coal in the last few years have now filtered through to the terms of trade but iron ore still has another year or so to correct. The dollar is not material given the terms of trade is based largely around the volume of exports than can be exchanged for imports at any given moment.

It’s impossible to be precise about how much iron ore is still sold on contract. Half is a conservative guess. The Q1 average price still operative for National Accounts across Q2 was $120. So, half of the iron ore calculation in the terms of trade still has 42% to fall (to reach $70). The other half has another 15%. Iron ore makes up roughly 30% of terms of trade so the total hit over the next year is roughly 9%. That would basically drop the ToT to its GFC trend low.

The main economic conclusion to draw from this is that national income will fall for the next year and that nominal growth will be very weak as well. There are a number of ways that falling national income is dispersed through the economy: corporate profits fall, dividends and costs are cut; government budgets lose revenue resulting in more cost cutting and/or tax rises and unemployment rises.
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Foxy
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Zero is coming...

Lou Ellen
10 Sep 2014, 10:52 AM
Iron ore is going to $70 sooner rather than later. The oversupply in the market is big but is headed for huge, somewhere between 200 and 300 million tonnes per annum (mtpa) capacity within eighteen months. To balance the market, roughly two-thirds of the rationalisation is going to come from seaborne supply. That means a lot of Australian production is going to close, along with assorted international high cost producers.

The largest marginal supply in the global seaborne market is Fortescue Metals Group (150mtpa). It’s cost of production is likely to form the price floor as the global shakeout transpires, somewhere around $70.

Owing to bulk commodity contract pricing, the real price falls for Australian miners lag spot markets by three to six months. Much of the price falls for coal in the last few years have now filtered through to the terms of trade but iron ore still has another year or so to correct. The dollar is not material given the terms of trade is based largely around the volume of exports than can be exchanged for imports at any given moment.

It’s impossible to be precise about how much iron ore is still sold on contract. Half is a conservative guess. The Q1 average price still operative for National Accounts across Q2 was $120. So, half of the iron ore calculation in the terms of trade still has 42% to fall (to reach $70). The other half has another 15%. Iron ore makes up roughly 30% of terms of trade so the total hit over the next year is roughly 9%. That would basically drop the ToT to its GFC trend low.

The main economic conclusion to draw from this is that national income will fall for the next year and that nominal growth will be very weak as well. There are a number of ways that falling national income is dispersed through the economy: corporate profits fall, dividends and costs are cut; government budgets lose revenue resulting in more cost cutting and/or tax rises and unemployment rises.
Forgive my sinersizm, that ofcouse will push the price of houses up, right.
An asset class that loses money for the owners, every day of the week.
House ownership=religion in this country.
A man's house is his castle, right.
Maybe it is his church.
Please understand that I do not say this is wrong, I simply wish to understand.
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newjez
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Mustapha Mond
10 Sep 2014, 11:29 AM
Forgive my sinersizm, that ofcouse will push the price of houses up, right.
An asset class that loses money for the owners, every day of the week.
House ownership=religion in this country.
A man's house is his castle, right.
Maybe it is his church.
Please understand that I do not say this is wrong, I simply wish to understand.
Why would the shattering of the economy push up house prices?

We are effectively talking an austerity led recession. Yes, interest rates will fall, but this will have sod all effect on the economy before it readjusts. Yes, after this period of readjustment, property prices will rise, but they may well fall first. This is happening now. 2015/2016 are the adjustment years.
Edited by newjez, 10 Sep 2014, 01:35 PM.
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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Poontang
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Bardon
8 Sep 2014, 08:55 AM
I am off to Doha on Thursday I will make sure to post a picture of my lobster mornay fully prepped and placed back in the shell ready to eat!

I will also post the cost, maybe there should be a lobster index similar to the global Big Mac Index.
This was at a friends house in the US $6.99 a pound is "normal price". However as over 100 pounds of lobster were purchased it was $6 a pound. Maine Lobster
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Bardon
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Poontang
10 Sep 2014, 04:03 PM
This was at a friends house in the US $6.99 a pound is "normal price". However as over 100 pounds of lobster were purchased it was $6 a pound. Maine Lobster
Lovely, I used to live in the NE US and know how well valued lobster is up there. In fact I think I got my love for seafood and all things clam chowder during my formative years up there. I will still post the price of the white meat when i get up there, as it is nice and big, just for the comparison, I used to eat in high end in Shanghai but am kicking myself that records weren't kept, not!
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