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Daily Iron Ore Price, Commodities and Precious Metals Update - October 2014
Topic Started: 3 Oct 2014, 10:08 AM (14,646 Views)
peter fraser
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newjez
7 Oct 2014, 09:13 AM
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.
What disease?
Any expressed market opinion is my own and is not to be taken as financial advice
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Elastic
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My call for recession mid to late 2015 is starting to look accurate.
Falling iron ore leading to collapsing dollar leading to inflation spike and possible rate rise.
If this leads to fall in property investor sentiment and a construction slowdown then it's all over. I tend to think that the current boom in house prices in Sydney and Melbourne has all happened too quickly and it may well fizz out at exactly the wrong time.
Not forgetting the shuttering of the auto industry over the next couple of years.
Looking forward to seeing how those schmucks in government handle this.
Only a rat can win a rat race.

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Dr Watson
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Elastic
7 Oct 2014, 09:35 AM
My call for recession mid to late 2015 is starting to look accurate.
What if we receive additional interest rate cuts before then? What if we see a revival of the First Home Buyer's Grant on a larger scale?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Elastic
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My feeling is that the fall in the $Aus will prevent the RBA from acting to save the economy.
Only a rat can win a rat race.

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CBA Commodities Daily Alert 06-Oct-14

Posted Image

BHP aims to cut iron ore costs

BHP Billiton is aiming to cut iron ore costs by 25%, from ~USD25/t
to less than USD20/t (excluding freight and royalties) in the medium
term. On an equivalent basis, Rio Tinto’s iron ore costs are currently
~USD20/t. BHP also said that it sees seaborne iron ore demand and
supply lifting 55Mt and 140Mt, respectively, in 2014. The company
estimates that ~50Mtpa of private iron ore capacity in China was
idled between December and August due to weak iron ore prices.

Commodity prices finished mostly higher as the US dollar weakened,
increasing the purchasing power of non-US consumers. The USD
was weaker on expectations against the US Federal Reserve lifting
interest rates soon, after the US labour participation rate declined to
its lowest level since February 1978 despite the headline
unemployment figure falling to 5.9%, its lowest since July 2009. The
improvement in the US unemployment rate also prompted base
metal and crude oil benchmark prices higher on demand hopes. Iron
ore remained unchanged at USD79.60/t (CFR China) due to the
Golden Week holiday in China which ends today.

According to some media reports, Glencore may be laying the
groundwork for a potential merger with Rio Tinto in the next year,
which would create the world’s largest mining company.

Freeport McMoRan has agreed to sell its 80% stake in the
Candelaria/Ojos del Salado copper mining project in Chile to Lundin
Mining. The mine produced 77kt of copper and 42koz of gold in the
first six months of 2014.

US metallurgical coal exports fell by 5.7% y/y to 4.6Mt in August,
with the average realised price falling 16.3% y/y to USD103/t. US
thermal coal exports declined by 46.5% y/y to 2.3Mt in August.

ExxonMobil estimates that its 20Mtpa Alaska LNG project will take
seven years to construct from an estimated start date of 2H18/1H19.
The company is looking for Federal Energy Regulatory Commission
(FERC) approval by July 2018.
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CBA Commodities Daily Alert 07-Oct-14

Posted Image

IMF cuts world growth forecasts

The International Monetary Fund has trimmed global growth
forecasts, estimating 3.3% growth in 2014 (down 0.1 percentage
points) and 3.8% growth in 2015 (down 0.2pp).

Base metals were mixed despite mounting demand concerns in
Europe after industrial production contracted more than expected in
August. Crude oil benchmarks fell after the EIA cut its 2014 and 2015
crude oil price forecasts in its October Short Term Energy Outlook
(STEO). Iron ore rose by 1.0% to USD80.42/t (CFR China).

The US Energy Information Administration (EIA) estimates that WTI
crude oil will average USD97.72/bbl in 2014 and USD94.58/bbl in
2015, down from their September estimate of USD98.28/bbl and
USD94.67/bbl respectively. The group also forecasts Brent crude oil
to average USD104.42/bbl this year and USD101.67/bbl next year,
down from earlier estimates of USD106/bbl and USD103/bbl
respectively. The group revised US crude oil output higher by 10kb/d
to 8.54mb/d in 2014, while reducing their 2015 forecast by 30kb/d to
9.5mb/d. US crude oil output peaked in 1970 at 9.6mb/d. The EIA
also cut their world oil demand forecasts from 91.55mb/d to
91.4mb/d in 2014 and from 92.89mb/d to 92.71mb/d in 2015.

A UK appeals court will make a ruling later today regarding the LME’s
appeal of a ruling in March that stopped its plan to ease delivery
times at its warehouses. RUSAL successfully argued against the new
LME warehouse rules in March, justifying they did not make markets
more transparent as the LME had claimed.
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CBA Commodities Daily Alert 08-Oct-14

Posted Image

LME to enact new warehouse rules

The LME has won an appeal in a UK court that will allow it to impose
new warehouse rules that should reduce delivery times for metals
and potentially lower metal premiums. Aluminium markets will likely
be most impacted by the changes given the volume of aluminium in
LME warehouses and that most buyers purchase the metal at the
LME price plus the aluminium premium. RUSAL, the world’s largest
aluminium producer, plans to appeal the ruling. The LME plans to
implement its new warehouse rules in February 2015.

Base metals finished mostly lower on demand concerns after the
International Monetary Fund (IMF) cut its global growth outlook in
2014 and 2015. Despite gold futures falling, precious metals finished
higher as the US dollar weakened on US growth concerns following
the release of the minutes from the US Federal Open Market
Committee’s (FOMC) September meeting. Iron ore fell 0.3% to
USD80.18/t (CFR China).

The FOMC minutes revealed the debate amongst policymakers on its
interest rate guidance was more robust than in prior months. Several
officials showed concerns about misleading investors and pushed for
a more data-dependent approach. "The concern was raised that the
reference to "considerable time" in the current forward guidance
could be misunderstood as a commitment rather than as datadependant."
A number of FOMC members said US economic growth
“might be slower than they expected if foreign economic growth
came in weaker than anticipated.”

Australian iron ore miner, BC Iron, will proceed with a full takeover of
Iron ore Holdings, removing concerns the deal may fall through due
to falling iron ore prices.
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Mining efficiency drops 40 per cent in Australian iron ore mines

By Joanna Prendergast

Iron ore producers and miners in general right across Australia, looking to firm up their bottom lines should look at the efficiency of their machinery to make some savings, according to an industry report.

PricewaterhouseCoopers says its studies have shown efficiency of use of mining equipment in Australia has dropped.

Within the iron ore sector, the productivity of iron ore mining equipment has fallen 40 per cent in the past four years.

Jock O'Callaghan is PwC's energy, utilities and mining leader.

He said efficiency in iron ore miners has fallen dramatically and can't be explained by production increases.

"As we put a big focus in the late 2009 - 2010 period on higher volumes, we saw a big drop off in the efficiency in the use of the equipment at mine sites," he said.

In just four years since 2009, we've seen the efficiency of mining equipment at iron ore mines in Australia is down by 40 per cent."

"That compares to the world wide trend which is no where near as steep decline and the world wide iron ore trend, which has now crossed over and is performing better than Australian iron ore."

He said Australia has gone from being a global leader to one of the worst when it comes to being efficient with machinery use.

"There is a critical message here that we think in Australia that we are very good at running mines. This data shows that we are only in terms of the efficiency of which we use mining equipment, we are only better than the mines in Africa. That came as a shock when we saw the data," he said.

The data comes out of the latest in PwC's Mining for Efficiency series, a study looking at 20 years of operating performance data from 136 open cut mines around the world. It compares data from 59 Australian mines in this study and 4,760 pieces of equipment.

Read more: http://www.abc.net.au/news/2014-10-08/mining-equipment-use/5799530
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India needs to scrap iron ore export tax as prices sink - miner Sesa

By Krishna N Das and Manolo Serapio Jr

(Reuters) - India needs to swiftly remove a tax on iron ore exports, the country's top private miner of the commodity said, calling the duty an "economic barrier" in the face of falling global prices.

The country's iron ore shipments have already slowed to a trickle after a ban on mining in key producing states, with a 30 percent tax on exports making it even more difficult to sell to a world market where prices have sunk 40 percent this year.

"There is an urgent need to eliminate the export duty, which represents an economic barrier to mining in the current low price environment for low grade iron ore fines," Tom Albanese, chief executive of Vedanta Resources (VED.L) that controls Sesa Sterlite Ltd (SESA.NS), told Reuters in an email.

Sesa hopes to restart mining in Goa early next year after a decision by the Supreme Court in April 2014 to lift a 19-month mining ban in the state aimed at weeding out illegal miners.

But with global iron ore prices sliding, it makes more sense for miners there to sell to local steelmakers than export. Mining curbs have also forced some Indian steel producers to import iron ore.

The problem is that the iron ore produced in Goa is of little use to Indian steelmakers, many of whom lack the sophisticated plants needed to process the low-grade material.

"Amidst low export revenue and high taxes within the country, it is very difficult for these miners to sustain operational profits," said Prakash Duvvuri, head of research at Indian consultancy OreTeam.

The 2015 restart for Sesa's operations in Goa, previously India's top exporting state, indicates months of delay versus initial expectations for a restart in September.

"Based on recent public comments by the government of Goa, it's now probably realistic to assume mining to start by January to February at the earliest," Albanese said in the email late on Tuesday. Albanese was previously the CEO of Rio Tinto (RIO.AX) (RIO.L), but quit the mining giant last year after the company revealed a $14 billion writedown.

Rio on Tuesday said it rejected a takeover approach from smaller rival Glencore Plc (GLEN.L) that would have created a $160 billion mining and commodities behemoth, a proposal Glencore made in July as prices of Rio's top moneymaker iron ore headed to five-year lows.

SUPPLY GLUT

A surge in global supply, led by top producers Australia and Brazil, has depressed iron ore prices this year to their weakest since September 2009 at around $80 a tonne.

That has pushed many smaller producers from Asia to South America out of the market as big, low-cost miners like Vale (VALE5.SA), Rio Tinto (RIO.AX) (RIO.L) and BHP Billiton (BHP.AX) (BLT.L) dominate.

Before the sustained slump in global iron ore prices, Sesa was targeting a six-fold jump in output in the year to March 2015 after the Goa ban was lifted. Sesa's mining operations are mostly in Goa.

India used to be the world's No.3 exporter of the steelmaking ingredient until higher costs along with mining bans in key states Goa and Karnataka slashed shipments. India's exports to top market China stood at 7.5 million tonnes over January-August, ranking ninth, behind Chile and Malaysia.

Along with existing high taxes and freight charges, India is also planning to increase the royalty on iron ore - or the percentage of sales paid to state governments - to 15 percent from 10 percent. The high costs, Duvvuri said, might force smaller miners in Goa to either sell their mines or close down.

"As far as fresh mineral extraction is concerned, it's not viable at all. So it's not a question of what are the margins. Margins are not there," said Ambar Timblo, managing director of Goa-based miner Fomento Resources.

Read more: http://in.reuters.com/article/2014/10/08/sesa-sterlite-ironore-mining-idINKCN0HX0BM20141008
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Platts China Steel Sentiment Index Falls to Lowest Level since January

Published: Oct 9, 2014 4:00 a.m. ET

BEIJING, Oct. 9, 2014 /PRNewswire/ -- China's steel sector appears to be relying heavily on the export market in the face of ongoing weak domestic demand, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a headline reading of 38.09 out of a possible 100 points in October.

The October index was down 7.78 points from 45.87 in September, marking its lowest level since January this year. The CSSI reflects expectations of market participants for the month ahead. Similar to a purchasing managers' index, a CSSI reading above 50 indicates an increase/expansion and a reading below 50 indicates a decrease/contraction.

Platts China Steel Sentiment Index – October 2014(a figure over 50 indicates expectations of an increase; under 50 indicates a decrease)

Steel exports from China have seen record high volumes this year and the market expected this trend to continue into October. The new export orders index was recorded at 70.96, up 12.91 from September.

"This latest index shows the extent to which the Chinese steel market is trying to export its way out of trouble," said Paul Bartholomew, Platts managing editor for steel and raw materials. "The steel sector is still battling with overcapacity, the property construction sector – which is a major user of steel – is still in the doldrums, so Chinese mills and traders are increasingly looking offshore for customers," he said.

With iron ore producers already coping with low prices, China's steel market participants are expecting crude steel production to fall further over the next month. The reading of 35.00 for steel production in October was down 6.37 points from September, and was the fourth consecutive month of sub-50 readings, indicating that participants predicted output would fall.

"Expectations of lower steel production can be attributed in part to the week-long holiday in China at the start of October, but output tends to come off slightly in the final quarter," Bartholomew said. "It could put iron ore under more pressure until the pick-up in demand the market typically gets towards the end of the year."

The latest CSSI indicates the industry is largely expecting a drop-off in domestic orders with an index reading of just 35.25 points, 9.56 lower than the previous month. The outlook for steel prices improved to 26.74 in October – compared with 10.63 in September.

The monthly Platts CSSI is based on a survey of approximately 50 to 75 China-based market participants including traders, stockists and steel mill operators. The survey of month-ahead sentiment is conducted during the last full working week of each month, with the results published via press release and Platts' products and services before the 10th of the next month. Platts began tracking steel sector sentiment in China in May 2013. The Platts China Steel Sentiment Index survey plays no role in Platts' formal price assessment processes.

Read more: http://www.marketwatch.com/story/platts-china-steel-sentiment-index-falls-to-lowest-level-since-january-2014-10-09
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