Australia's Iron Ore Miners Hang Tough as Prices Fall

MarineLink.com
Wednesday, March 12, 2014

By James Regan, Reuters

If Australian miners are worried about the dramatic decline in iron ore prices, it doesn't show.

At an annual gathering of many of the world's biggest and smallest iron ore producers here the mood is upbeat - as if the heftiest one-day fall in ore prices since the global financial crisis never happened.

"Iron ore mining isn't tennis, it's a contact sport," said David Flanagan, chairman of Atlas Iron Ltd. "Sometimes it hurts a bit, like you copped it in the stomach. We just get on with it."

Iron ore for immediate delivery to China slumped 8 percent on Monday after data showed China's trade balance swung into deficit, amplifying concerns about a slowdown in the world's No. 2 economy and the biggest importer of the steel-making ingredient.

Iron ore is down 22 percent so far this year to $104.70 a tonne, triggering comparisons with a slump in 2012 to below $90 that shuttered many mines and left producers rethinking expansion plans.

Australia is expected to ship more than half a billion tonnes of iron ore to China in 2013. Like most Australian producers, Atlas is still in the black, putting its total costs of getting iron ore into China at A$70 to A$75 a tonne ($63 to $68 a tonne).

"I'm just not fussed over what's gone on in the market this week," said Wayne Richards, executive chairman of Tawana Resources, which is digging an iron ore mine in Liberia.

"The way I see it, the price was driven down on sentiment, not fundamentals, and sentiment will again push the price up," he said.

China's biggest listed steel maker, Baoshan Iron & Steel , complained this week that iron ore prices were still too high given weak demand and government efforts to close outdated and polluting mills.

But big miners such as Fortescue Metals Group, Rio Tinto and BHP Billiton say Chinese demand won't peak until around 2025 at about a billion tonnes a year.

"This market isn't going to disappear," Fortescue's director of development, Peter Meurs said.

Party Over?
The big miners have room for manoeuvre with landed prices to China at around $50 a tonne, but further falls could put some higher cost miners in trouble.

Shares in Gindlabie Metals, which has a minority stake in the Western Australia Karara venture with production costs of about $70 or more before shipping, fell 18 percent on Wednesday.

Shares in other small miners have also taken a hit with Atlas down 16 percent over the past three weeks and BC Iron down 11 percent.

The majors have not been spared either.

BHP has fallen nearly 8 percent over the last three weeks and Rio Tinto 13 percent, while Fortescue, which is carrying debt of more than A$8 billion, has slumped 17 percent.

The impact can also be seen in Perth, a city that is the headquarters for many miners and well-versed in the boom-bust cycle of commodities.

In West Perth, a low-rise area of the city favoured for long lunches and deal making among the mining set, restaurants and cafes have been ominously quiet lately.

"I just don't go down to West Perth these days, and I'm not alone," one mining executive said. "With so much uncertainty out there, it sends the wrong message to shareholders."

Most at the Global Iron Ore and Steel Forecasting Conference say the price fall was the result of Beijing's efforts last year to tighten credit, which they believe could threaten 2014 economic growth targets.

"We can't control factors like that," said Morgan Ball, managing director of BC Iron Ltd, which is operating on an assumption iron ore will average $110-$130 a tonne in 2014.

"If it comes in within that range, we will have a very pleasing year," Ball said.

He may be overly optimistic though, if analyst forecasts are right.

Citigroup sees the price falling to $80 by 2016, citing "inescapable market surpluses".

Still, said Ball: "Over the past eight years, analysts' forecasts have repeatedly been wrong on the downside."

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Bulk Carrier Trends

How to Avoid Claims for Self-cooking Cargo

North P&I Club has advised its members to be extra vigilant during loading and transport of soya beans to ensure they do not get blamed for cargoes that start ‘cooking’ at sea.

Baltic Index Falls on Weak Freight Rates

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Monday due to weaker rates across all segments, except handysizes.

Los Angeles Pushes for Valero Terminal Improvements

The Port of Los Angeles has released an Initial Study/Notice of Preparation (IS/NOP) — the first step in the Environmental Impact Report (EIR) process — for a Marine

Finance

Funding Approved for Georgia’s New Inland Terminal

At its July board meeting, the Georgia Ports Authority (GPA) approved a spending package of $19.7 million to construct the Appalachian Regional Port in Chatsworth, Murray County, Ga.

Baltic Index Falls on Weak Freight Rates

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Monday due to weaker rates across all segments, except handysizes.

As Market Sours, LPG Tankers Anchor off Singapore

Record U.S. LPG exports to Asia flip market into a glut. Last year, liquefied petroleum gas (LPG) supplied to Asia was being snapped up by petrochemical makers.

News

Boeing 767 Shipped by Barge

MTS Statum completes marine towage of barge carrying Boeing 767 from Shannon Airport   Marine service provider Marine and Towage Services Group Ltd. (MTS) has

New Ferry MV Woods Hole Delivered

The newly built ferry M/V Woods Hole has been delivered to serve Woods Hole, Martha’s Vineyard and Nantucket.   Built by Conrad Industries of Morgan City, La.

New Details Emerge on Loss of USS Indianapolis

A Naval History and Heritage Command (NHHC) historian has recently uncovered information that sheds new light on the loss of the World War II cruiser USS Indianapolis (CA 35).

Logistics

Boeing 767 Shipped by Barge

MTS Statum completes marine towage of barge carrying Boeing 767 from Shannon Airport   Marine service provider Marine and Towage Services Group Ltd. (MTS) has

Port of Rotterdam Throughput Dips in 2016

Compared to the first half of 2015, which saw throughput increased by 6.8 percent, the Port of Rotterdam handled 3 percent less cargo in the first six months of 2016,

Seago Line Introduces New Vessel to Liverpool Service

Maersk subsidiary Seago Line has introduced a new vessel to its recently created feeder service calling at Liverpool. The Independent Accord has already started

 
 
Maritime Contracts Maritime Security Maritime Standards Navigation Pod Propulsion Port Authority Salvage Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1629 sec (6 req/sec)