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Daily Iron Ore Price, Commodities and Precious Metals Update - October 2014
Topic Started: 3 Oct 2014, 10:08 AM (14,644 Views)
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CBA Commodities Daily Alert 14-Oct-14

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Crude oil prices slump after IEA report

Crude oil benchmarks slumped after the International Energy Agency
(IEA) cut its forecast for incremental world crude oil demand growth
by 250kb/d to 650kb/d this year, the slowest increase in crude oil
demand since 2009. The group also reduced its demand growth
forecast next year by 100kb/d to 1.1mb/d, estimating OPEC will need
to provide 29.3mb/d in 2015, 200kb/d less crude oil supply to world
markets than previously estimated. The IEA’s views add to surplus
concerns already in the market on strong US crude oil output.
Expectations are also increasing that OPEC will compete for market
share in crude oil markets instead of prices after Saudi Arabia, Iran
and Iraq recently cut their prices for customers.

Base metals were mixed as demand hopes arising after China’s
central bank cut interest rates were countered by weaker demand
sentiment in Europe after Germany downgraded its growth outlook.
Gold futures rose on views the US Federal Reserve will delay an
increase to interest rates due to a faltering global economy. Iron ore
fell by 0.4% to USD83.82/t (CFR China).

Unconfirmed media reports suggest India’s steel alloy consumption
grew at 0.5% in the six months ended 30 September, the slowest
pace in a decade.

According to Indonesia’s Energy and Mineral Resources Ministry,
nickel ore and bauxite production was 3.9Mt and 2.8Mt, respectively,
from January to August. These numbers are higher than Indonesia’s
initial estimates in January. In 2013, Indonesia produced 60Mt of
nickel ore and 56Mt of bauxite.
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Rio Tinto records surge in iron ore production

October 15, 2014 - 9:53AM
Amanda Saunders

Rio Tinto is on track to eclipse its own ambitious iron ore production target for the 2014 year after a stellar September quarter, amid mounting criticism of its increasingly unpopular expansion strategy from government and industry.

On Wednesday morning, Rio posted a 12 per cent rise in September quarter production to 76.8 million tonnes, compared to the same time last year. Deutsche Bank had tipped 78.1 million tonnes, while UBS was betting on 76.3 million tonnes but the market is likely to label it a beat.

The miner also increased its copper production guidance for the full year but for Rio it is really all about iron ore - the commodity accounts for 90 per cent of its earnings.

The fresh production record came a day after Western Australian Premier Colin Barnett accused Rio and fellow mining giant BHP Billiton of "acting seemingly in a concert way" by flooding a depressed iron ore market, appearing to hint that the miners were colluding.

UBS is tipping Rio could exceed its targeted iron ore production record of 295 million tonnes this year, and says the mining giant "will continue to be the most competitive player in the iron ore space", amid mounting criticism of its expansion strategy.

Rio has found itself under fire this month over the price impact of its iron ore expansion but UBS mining analyst Glyn Lawcock says Rio is well placed to take advantage of growing demand in emerging markets, lead by China, through its expandable long life operations.

Rio is racing to increase annual production by about 25 per cent to 360 million tonnes a year, through low-cost expansions of its existing Pilbara infrastructure, which are set to be finished before June.

"Increasing iron ore supply globally is expected to weigh on the long run iron ore price," Mr Lawcock says.

"However, Rio is the lowest cost producer and in our view will continue to be the most competitive player in the iron ore space."

Mr Lawcock is tipping Rio's full-year iron ore output for calendar 2015 could surprise on the upside.

Rio's update on Wednesday revealed it has produced 216.2 million tonnes in the nine months to September, a 12 per cent rise on the same period last year. Rio's equity share of that production is 170.3 million tonnes.

The miner is targeting production of 295 million tonnes for the current year, from its operations in the Pilbara and Canada, but analysts say it could hit 300mtpa, which should increase again to least 330 million tonnes in calendar 2015.

Read more: http://www.smh.com.au/business/mining-and-resources/rio-tinto-records-surge-in-iron-ore-production-20141015-1166z8.html
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Hero to zero; iron ore now drags chain

October 15, 2014 - 12:15AM
Nathan Bell

For investors in Australian stocks, there is no bigger issue than the plummeting iron-ore price.

This decline - and the concomitant collapse in the share price of some iron-related stocks - is a trend that may well have further to go and is one that has huge implications for Australia's terms of trade and the possibility of escaping a recession.

The oversupply in the iron-ore market is already substantial but will increase. Over the next 18 months between 200 million and 300 million tonnes a year in spare capacity will emerge.

A lot of Australian production is going to close, taking a few listed local and assorted international high-cost producers with it. Locally, Fortescue Metals Group is most exposed.

There's a serious possibility that the price falls could trigger a recession and at the very least, future economic growth will be weakened.

China's shock decision last week to impose harsh new tariffs on Australian coal supplies could also have negative implications for the economy.

With iron ore constituting almost a third of Australia's terms of trade, the total hit over the next year will be about 9 per cent. That may not sound like much but it would take the measure through its GFC trend low.

That's why national income is likely to fall over the next year and nominal growth will probably be weak. As a consequence, corporate profits are likely to fall, dividends and costs could be cut and government budgets will be stretched, possibly leading to more cost-cutting and/or tax rises at a time of rising unemployment.

BHP estimates that for every $1 fall in the iron-ore price it loses $135 million in profit. Rio estimates it loses $122 million. Any fall in the Australian dollar may offer some relief but it won't fully offset the huge margin squeeze that is now under way. The profits of the big three are likely to take an $8 billion haircut.

That means shareholders can forget about buybacks and growing dividends. Households will also feel the pinch. As mining income stalls, households could struggle to overcome the mining capex contraction and income downdraft. Per capita disposable income is already falling and has been since the terms of trade peaked in 2011.

As the decline in incomes accelerates, companies in the discretionary services and retail sectors will find sales growth difficult. High immigration, which helps grow the pie, will help but the per capita headwinds will be difficult to overcome for businesses dependent on domestic demand for growth.

Now, remember how the mining boom delivered us personal and corporate tax relief and a wave of middle-class welfare? These measures drove down the percentage of household income taxed to a 35-year low, a process that's already reversing.

By the mid-year economic update (MYEFO) in December, the government may still not have passed all of its May budget measures yet will be staring at an even bigger budget black hole. Both the income and confidence impacts for households will be significant.

We're already on the threshold of a labour market shock as the mining boom unwinds. In the next year or so major LNG and iron ore projects could shed some 35,000 to 40,000 jobs. With appropriate multipliers, many more may be lost.

The housing boom will help keep the rate down but unemployment is likely to continue to grind higher as strong immigration outpaces jobs growth.

Australia may not enter a recession but for investors and consumers it may very well feel like one. A recession is a very real risk if house prices begin to fall, as there would be nothing to support domestic demand.

For that reason you can expect interest rates to remain low. Either way, the economic and investment challenge presented by the iron-ore crash is formidable.

Read more: http://www.smh.com.au/money/investing/hero-to-zero-iron-ore-now-drags-chain-20141009-113r6l.html
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Perthite
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Brutal truths. It is going to be and interesting next 12 months.
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Mike
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Perthite
15 Oct 2014, 04:15 PM
Brutal truths. It is going to be and interesting next 12 months.
I predict in 12 months you will still be here telling us it will be an interesting 12 months ahead.

Only difference is you will have moved on to the next neagtive news story to spin to try and justify you're claims which have been consistantly wrong.
http://mike-globaleconomy.blogspot.com.au/
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Perthite
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Spin it DJ...
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Mike
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Perthite
15 Oct 2014, 06:00 PM
Spin it DJ...
No one on these forums can spin it like you can that is for sure.
http://mike-globaleconomy.blogspot.com.au/
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PiratePete1911
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Mike
15 Oct 2014, 06:08 PM
No one on these forums can spin it like you can that is for sure.
You and Perthite are like 2 peas in a pod, you are just spinning from different sides. He posts nothing but the negative stories and you post nothing but the positive stories. Just on the front page today you have two posts putting a positive spin on iron ore and China.
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UPDATE 1-Dalian iron ore extends gains to 3-week high, but glut weighs

Tue Oct 14, 2014 12:52pm IST
By Manolo Serapio Jr

SINGAPORE, Oct 14 (Reuters) - Chinese iron ore futures rose to their highest in more than three weeks on Tuesday, adding to sharp gains from the previous session after being hammered for most of this year, but lingering worries over a supply glut kept a lid on gains.

China's iron ore and steel futures surged as much as 4 percent on Monday when investors covered short positions amid hopes that the markets may have found a bottom for now after heavy losses for most of 2014. Prices for both have dropped around 30 percent this year.

The most-traded iron ore for January delivery on the Dalian Commodity Exchange closed up 1.4 percent at 589 yuan($96) a tonne after earlier hitting 591 yuan, its strongest since Sept. 18.

Dalian iron ore rose by its 3.9 percent ceiling on Monday, climbing in tandem with rebar steel futures in Shanghai.

That helped lift spot iron ore prices, with the benchmark 62-percent grade for immediate delivery to China .IO62-CNI=SI jumping 4 percent to $83.10 a tonne on Monday, its highest since Sept. 17, according to data compiled by the Steel Index.

Some traders were doubtful whether the gains would be sustained as spot cargoes remained plentiful.

"We're not very optimistic about the market so we don't think it will be sustained," said a Shanghai-based iron ore trader, adding there was modest buying interest for spot cargoes from Chinese steel mills.

"Further supportive Chinese data will be needed" to extend the rally in iron ore prices, analysts at Australia and New Zealand Banking Group said in a note.

There was more positive news from China on Tuesday after a senior official at the country's powerful economic planner said investment growth should pick up in coming months as authorities fast track infrastructure projects to support growth.

That came after data released on Monday showed that China's exports rose more than forecast in September and imports unexpectedly increased, calming fears of a slowdown in the world's No. 2 economy.

China's iron ore imports also rose in September to 84.69 million tonnes, the second highest monthly volume on record.

The most-active January rebar contract on the Shanghai Futures Exchange ended 0.2 percent firmer at 2,649 yuan a tonne, after rising to 2,671 yuan earlier, its highest since Sept. 22.

Read more: http://in.reuters.com/article/2014/10/14/markets-ironore-idINL3N0S92ET20141014
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CBA Commodities Daily Alert 15-Oct-14

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Metals fall on demand concerns

Base metals finished lower on demand concerns after China’s
inflation grew at the slowest pace in September since January 2010
and US wholesale prices unexpectedly fell in September. Gold
futures rose on safe haven demand as global economies continue to
falter and US equity markets decline. Crude oil benchmarks fell as
increasing crude oil output in US and Libya, and weaker crude oil
demand, exacerbate surplus concerns. Crude oil prices have also
come under pressure as key OPEC member countries appear to be
targeting market share over price. Iron ore fell by 1.5% to
USD82.55/t (CFR China).

According to the All India Gems and Jewellery Trade Federation,
India’s September gold imports likely lifted fourfold to 95t relative to
last year, due to festival demand and expectations that prices will fall.

China Iron & Steel Association (CISA) estimate domestic and
imported iron ore prices in China will likely remain at current levels
through October due to flat demand and strong supply, with the
latter exacerbated by high port inventories and rising domestic iron
ore output.

Whitehaven’s coal sales rose by 22% y/y to 3.04Mt in the
September quarter. The Company said its Maules Creek coal project
is on track to rail its first coal in 1Q15. The project is expected to
produce 4Mtpa of coal in the first year, before ramping up to 13Mtpa
over the next three years.

South Korea’s LNG imports fell by 6.6% y/y to 2.3Mt in September,
with its average realised price rising 10.1% y/y to USD17.6/mmbtu.
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