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Daily Iron Ore Price, Commodities and Precious Metals Update - October 2014
Topic Started: 3 Oct 2014, 10:08 AM (14,636 Views)
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CBA Commodities Daily Alert 01-Oct-14

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Global PMIs slow in September

Base metals finished mostly lower on demand concerns after the US
manufacturing sector expanded more slowly than expected in
September. Crude oil benchmarks were mixed, but were pushed
lower in trading after Saudi Arabian Oil Company cut its crude oil
prices for customers in US, Europe and Asia, boosting speculation
that Saudi Arabia won’t cut output anytime soon. Gold futures rose
on safe-haven demand as economic concerns flared up in Europe
after Italy cut its economic growth forecast in 2014 and 2015, and
Germany’s manufacturing moved into contraction territory in
September. Iron ore rose by 1.0% to USD78.30/t (CFR China).

US crude oil inventories fell by 1.36mmbbl to 356.6mmbbl in the
week ending 26 September, well below forecasts of a 0.93mmbbl
increase. In the same week, US oil production fell marginally to
8.837mb/d, just below the 28-year high of 8.867mb/d recorded last
week, while imports increased to 7.284mb/d. The US refinery
utilisation rate fell from 93.4% to 89.8%.

In a conference in Queensland, Australian iron ore miners with
operations in Brazil said operating conditions had toughened since
iron ore prices fell. Crusader Resources said that marginal smelters
have reacted to the soft iron ore prices by either slowing down
operations or shutting down, reducing the number of buyers for iron
ore product in Brazil.

African Minerals’ iron ore production from its operations in Sierra
Leone lifted 58% yoy to 9.8Mt in 1H14, while the company’s cash
costs fell by 9% yoy to USD39/t. African Minerals left its iron ore
export guidance of 16-18Mt in 2014 unchanged.
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Dr Watson
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Bearish mood lashes iron ore companies

October 4, 2014
Max Mason and Peter Ker

A long-awaited fall in the Australian dollar has failed to deliver respite for the local iron ore industry, with investors continuing to punish the nation's most valuable export sector.

More than $2.2 billion has been wiped off the value of Australia's pure-play iron ore miners over the past month, despite a 7 per cent fall in the local currency over the same period.

Big diversified miners such as BHP Billiton and Rio Tinto, which also have significant exposure to iron ore, have lost a further $US22 billion ($25 billion) of their value, but off a dramatically bigger base.

A weaker Australian currency is good for local iron ore miners, whose revenue is typically received in US dollars but whose costs are mostly paid in Australian dollars.

But despite the falls in the currency largely counter-balancing the slide in the iron ore price over the past month, the share prices of the pure-play iron ore miners have continued to collapse.

Atlas Iron shares have lost 35 per cent of their value over the past month, while BC Iron shares have fallen 34 per cent over the same period.

Mount Gibson shares have fallen by 29.2 per cent, while Fortescue has lost 14 per cent of its value.

At the current iron ore price of $US79.60 a tonne, several of the mid-tier miners are believed to be loss-making, and all of them are racing to cut costs.

"It's looking Darwinian in the iron ore space, where the majors have successfully continued on with their big expansion plans, and the juniors are struggling to make a buck," Platypus Asset Management senior materials analyst Anna Kassianos said.

Two small iron ore companies, Western Desert Resources and Sherwin Iron, have already collapsed this year, and Ms Kassianos said they may not be the last.

"You've seen a few of the juniors roll over in the Northern Territory and South Australia. I wouldn't be surprised to see a few more roll over, especially if prices stay where they are for several more months," she said.

"We believe the iron ore price could trade between the $60 and $90 a tonne range for the foreseeable future, given the magnitude of iron ore expansions relative to the continued slowing in demand."

When asked why the falls in the Australian dollar had not stemmed the bleeding for the miners, RBC Capital Markets analyst Chris Drew said the market sentiment was just too bearish.

Read more: http://www.smh.com.au/business/bearish-mood-lashes-iron-ore-companies-20141003-10pyl6.html
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CBA Commodities Daily Alert 02-Oct-14

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Base metals fall on Europe concerns

Base metals finished mostly lower on views an asset-buying program
announced by the European Central Bank (ECB) may not be enough
to boost Europe’s economy and commodity demand. Brent crude oil
continued to fall after Saudi Arabia’s decision to lower its crude oil
prices for customers in November spurred expectation the country
will fight for market share, exacerbating surplus concerns in crude oil
markets. Saudi Arabia is the world’s largest crude oil exporter. Iron
ore rose by 0.6% to USD78.80/t (CFR China).

Tin Industry group ITRI forecasts tin markets will move from a
balance this year to a potential deficit of 60kt for the next five years,
as current tin prices remain too low to encourage investment in new
projects. Annual world tin demand is currently around 365-370kt.

Operations at Freeport’s Grasberg copper and gold mine in
Indonesia have resumed after a vehicle accident that killed four
workers last week forced mining activities to a halt.

Rio Tinto controlled Turquoise Hill is still in talks with Mongolia’s
government to develop the USD4.2b expansion of the Oyu Tolgoi
copper and gold mine, despite the deadline for commitments from
project financiers expiring on 30 September. The expansion at the
mine has been delayed by more than 18 months as the company and
the Mongolian government failed to resolve a tax dispute, cost
overruns and shareholder conflicts.

Glencore has halted operations at its Sable zinc mine in Zambia over
a tax dispute with Zambia’s government.

Brazil’s iron ore exports rose by 14% y/y to 33Mt in September, while
its iron ore price fell by 30% to USD67.30/t (FOB Brazil).
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peter fraser
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BHP and RIO are producing ore at about $25 USD per tonne, BHP intends to reduce that cost to $20 USD per tonne.

Quote:
 
BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production.

The world's biggest miner is going head to head with arch rival Rio Tinto for global domination that in recent months has seen prices plummet, threatening to send smaller, higher cost suppliers to the wall.

BHP Billiton Iron Ore president Jimmy Wilson this morning announced the company planned to add a further 65 million tonnes of annual production to an already flooded market, with ambitions to become the lowest cost producer.

"Our confidence [in] this approach will enable us to drive unit costs, including freight and royalties, below $US20 a tonne in the medium term," he told an analyst briefing this morning.

"And our aim is to become the lowest all-in cash cost supplier of iron ore to China."

Rio Tinto holds the dominant position in the industry. It is the biggest and cheapest iron ore supplier.
http://www.abc.net.au/news/2014-10-06/bhp-billiton-to-cut-iron-ore-costs/5792388


Isn't it a shame that BHP and RIO are only making 200% on their production costs at the moment with plans to lift that to about 300%.

I don't know how they survive.
Any expressed market opinion is my own and is not to be taken as financial advice
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peter fraser
7 Oct 2014, 08:01 AM
BHP and RIO are producing ore at about $25 USD per tonne, BHP intends to reduce that cost to $20 USD per tonne.

Isn't it a shame that BHP and RIO are only making 200% on their production costs at the moment with plans to lift that to about 300%.

I don't know how they survive.
First time you come on an iron ore thread Peter. Where were you when on all the others when prices have crashed 40% since Jan alone ?

The same dopes that said iron ore would average $130a tonne in 2014 and 2015.

This is only a projection is it not.

Let's at the bigger picture Peter , There costs were $50/a tonne when iron ore prices were fetching $190 a tonne. Meaning they were making $140/a tonne profit. What are they making now, $30 a tonne profit. So their profits were over 400% higher a while ago
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Edited by Dr Watson, 7 Oct 2014, 08:26 AM.
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peter fraser
7 Oct 2014, 08:01 AM
BHP and RIO are producing ore at about $25 USD per tonne, BHP intends to reduce that cost to $20 USD per tonne.




Isn't it a shame that BHP and RIO are only making 200% on their production costs at the moment with plans to lift that to about 300%.

I don't know how they survive.
A disease doesn't need to wipe out a population to be a major problem Peter. No one was ever talking about the destruction of the industry.
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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