Monday, August 31, 2009

China Expected To Drive Commodity Trade Finance

Trade financing in commodities such as crude oil, iron ore and copper in Asia is expected to grow rapidly in the months ahead.

This forecast comes as China continues to buy large volumes of commodities to fuel domestic development.

Experts said that this could create opportunities for Asian banks to enter the trade financing area as current players may not be able to keep up with demand.

China's GDP is estimated to see some seven per cent growth in 2009 and its planned stimulus measures, which involve sizeable infrastructure projects, could boost demand for trade financing in the region.

Experts said this will apply to commodities like oil, iron ore and copper, as China builds its strategic stockpile of such materials.

Eric Saux, regional head of Natural Resources and Energy, Financing, Societe Generale said: "We think there's roughly 10 per cent growth in volume in Asia, which is not small if you compare to the US and Europe. For us at Singapore, our volume for trade finance in Asia is around US$26 to US$28 billion."

SocGen currently handles about 25 per cent of the commodities trade financing in the region and expects its volumes to double in 2010.

SocGen said as volumes increase, Asian banks will have an opportunity to expand in trade financing. That is because the big traditional Western players are having trouble keeping up with demand, thanks to liquidity problems back home.

Mr Saux added: "As China's big companies get out of China, they can get the support of these banks. So I'm perhaps more optimistic in the case of Asia, rather than the consequences for the rest of the world because of the impacts of this economic situation."

And larger and more established lenders like the Bank of China is to lead the way as Asian institutions rush to fill the gaps left by their Western counterparts.

Source: Channel News Asia

China Needs To Limit Spot Purchases

China, the world’s largest iron ore consumer, needs to limit supplies of the material sold on the cash market as talks to settle contract prices stalled, Baoshan Iron & Steel Co. said.

The nation should reduce the number of its steelmakers to improve their bargaining powers with iron ore suppliers, Baoshan Steel President Ma Guoqiang said today in an online conference. Talks to settle prices with BHP Billiton Ltd., Rio Tinto Group and Vale SA are ongoing, Baoshan Vice President Chen Ying said.

The China Iron & Steel Association last month accused mining companies of encouraging “speculative” prices by increasing iron ore sales on the spot market. The association wants BHP, Rio and Vale to agree to a 35 percent price cut on annual contracts, which it wants as a Chinese benchmark.

Shanghai-based Baoshan Steel will buy iron ore at provisional price levels should the talks not lead to an agreement by Dec. 31, Chen said.

Rio Tinto, the world’s second-largest iron ore supplier, has offered a 33 percent price cut, which has been accepted by some Chinese customers as a provisional price until talks settle, Umetal Research Institute said in July. Fortescue Metals Group Ltd., Australia’s third-biggest ore supplier, agreed to a 35 percent price cut with China this month.

“Fortescue is a new iron ore supplier and its products account for a small portion of Baoshan’s needs,” Ma said.

State-owned Baosteel Group Corp., the parent of Baoshan, will continue to follow the lead of the China Iron & Steel Association, Ma said. Baosteel was previously the main Chinese negotiator for iron ore price talks before the steel association took over for this year’s contract.

Baoshan has enough ore to meet its requirements from long- term contracts, Ma said.

Source: Bloomberg

Vale, Tata In Mozambique Coal Studies

Vale SA, the world’s biggest iron- ore producer, and Tata Steel Ltd., India’s largest steelmaker, are involved in coal-mining viability studies in northern Mozambique, a government official said.

The companies were evaluating the potential of the Manhamba basin in Mozambique’s northern Niassa province, about 3,000 kilometers (1,865 miles) from the capital, Maputo, which the government estimates has more than 3 million metric tons of coal reserves, Niassa provincial governor Arnaldo Bimbe said in an interview yesterday.

Bimbe said that in addition to the Manhamba basin, there are “indications” of coal deposits in the Majune district about 100 kilometers east of Niassa province’s capital, Lichinga.

“We have not yet ascertained the real quantity -- the viability studies will help us know the real potential,” he said.

Tata and Vale have also won coal-mining concessions in the northwestern province of Tete, Bimbe said.

Source: Bloomberg

SAIL To Develop Chiria Iron Ore Deposits In Two Phases

Steel Authority of India Limited, fighting for about a decade to retain its tenuous control over Asia’s largest iron ore deposit at Chiria, has decided to go ahead with a two phased, INR 3,500 crore plan to produce more ore and set up a beneficiation plant.

The plan envisages expanding mining from a mere 1 million tonnes per annum at Dhobil to 7 million tonnes in two to three years by tapping new areas within Chiria such as Mclellan and Ajitaburu. Subsequently, output will be raised to 15 million tonnes by tapping the remaining leases such as Sukri in this forested zone.

The SAIL board has advertised for global consultants who will help it to develop the new mines and the iron ore beneficiation plant as well as a new township where a workforce numbering in thousands will be housed.

Sources said the total cost of the project would be about INR 3,500 crore. The first phase, which involves taking mining operations to 7 million tonnes per annum will itself cost more than INR 2,000 crore.

In this phase, SAIL will set up its first ore beneficiation plant.

Till now, it has only set up washeries at its mines, which do some minor beneficiations work.

With the Jharkhand government now in favour of letting SAIL continue its lease in Chiria, quick development of the area has become a necessity for the public sector steel behemoth.

Source: Steel Guru

Indian Coal Officers Call For Single Firm

A meeting of Coal Mines Officers’ Association of India, attended by officers from across the country, today resolved that Coal India Limited (CIL), currently comprising seven subsidiary companies, be merged into a single entity.

The association’s general secretary K.P. Singh told The Telegraph that a single entity would help save hundreds of crores in form of annual corporate tax paid to exchequers, which in turn would help release resources for other CIL activities. “Barring Eastern Coalfields Limited and Bharat Coking Coal Limited, other subsidiaries are profit-making units, forced to pay hundreds of crores every year as corporate tax,” Singh said.

In case all seven subsidiaries are merged, losses grossed by Eastern Coalfields and Bharat Coking Coal could be offset by profits of others which would reduce the tax burden.

Today’s meeting also opposed a CIL decision to not pay performance-related pay allowance to executives of loss-making firms. Since, all executives are CIL appointees, the panel demanded that irrespective of the place of posting, every staff be paid uniformly.

The meeting further opposed CIL’s decision to stop payment of coalfield allowance to officers posted in coal-fields. This allowance has being paid since 1974.

“We have opposed a proposal that seeks to transfer executives currently in E-3 grade to E-4 grade,” he added.

Source: Calcutta Telegraph

Slight Increase In Indian Iron Ore Exports

India exported 5.9-million-tonnes of iron ore in July, a 2% increase over the same period last year after clocking 26 million tonne of exports during the April-June quarter, the same as the year-ago period, according to data collated by Association of Iron Ore Exporters.

The growth comes at a time when the finance ministry is considering a proposal by the steel ministry to levy 10% tax on export of iron ore to ensure availability of ore to domestic steel makers. Iron ore is a key input in steel making.

The steel ministry recently wrote to finance minister Pranab Mukherjee suggesting that the proposed export duty has become essential for ensuring availability of iron ore to domestic steel companies, which have been facing lower supply of the raw material for the past 5-6 months.

Such a move would affect top iron ore exporters such as Sesa Goa, MSPL, Roongta Mines, Chowgule, besides government-owned trading house Mineral and Metal Trading Corporation(MMTC).

The iron ore exports rose around 5.4% in July from 5.6 million tonne in June, according to the study conducted jointly by Goa Mineral Ore Exporters Association, Kudremukh Iron Ore Company and MMTC.

“Demand for ore is coming mainly from small steel makers in China, which are dependent on the raw material sold in the spot market,” said RK Sharma, secretary general, Federation of Indian Mineral Industries.

Iron ore exports will continue to vary over the next few months till demand revives from large steel producers, he added. The large steel makers in China are still negotiating with global ore suppliers like BHP Billiton and Rio Tinto seeking price cuts of up to 50% on annual long-term iron ore contracts. As a result, supply orders for the large Chinese steel firms are yet to pick up. India produces close to 200 million tonne of iron ore every year, half of which is exported.

Around 80% of the country’s ore exports go to China, while the rest to Japan and Korea.

Source: Economic Times

Sunday, August 30, 2009

Indian Coal Pricing "Should Be Left To Market"

India's coal pricing may see a complete revamp and the sector may enter into a free trade zone, if suggestions of the country's Planning Commission are implemented.

"...Coal prices should ideally be left to the market and trading of coal, nationally and internationally, should be free," the Commission said advocating export of coking and non-coking coal and suggested benchmarking export prices with import rates.

Although coal prices were de-regulated in 2000, its price is fixed by state-owned companies under the guidance of the Coal Ministry. Navratna PSU Coal India, which accounts for more than 80 per cent of the country's total coal reserves, last raised coal prices in 2007 by 10 per cent.

Reviewing the Integrated Energy Policy, the Plan panel said, "High quality coking and non-coking coal, which are exportable, should be sold at export parity prices as determined by import price at the nearest port minus 15 per cent."

It further added that "since a substantial amount of coking coal is imported, domestic coking coal should be priced at import parity price".

The matter is likely to be taken up during the full Planning Commission meeting, headed by Prime Minister Manmohan Singh, on September 1, sources said.

When sought comments on Plan panel's suggestions, Coal India Chairman Partha S Bhattarcharyya said " that is an excellent suggestion. We are very happy."


Source: Economic Times

World Ferrochrome Almost Halves

According to a preliminary survey of the world production of ferrochrome in the first half of 2009 compiled and released in last week by International Chrome Development Association, being influenced by a substantial reduction in production of stainless steel and a considerable measure for adjustment of ferrochrome stocks implemented by steel mills, the world production of ferrochrome in the first half of 2009 decreased by 45.5% as a whole in comparison with that in the same period of 2008.

Also, the world production of ferrochrome in the first quarter of 2009 had a large decrease of 57.3% compared to that in the same quarter of 2008.

The quantities on material base of ferrochrome produced in the world for the first half of 2009 were low carbon ferrochrome: 120,430 tonnes, medium carbon ferrochrome: 77,394 tonnes, high carbon ferrochrome: 2,267,504 tonnes, silicochrome: 40,235 tonnes and total: 2,505,563 tonnes.

In comparison with the quantities of ferrochrome produced in the world for the first half of 2008, those produced for the same period of 2009 were low carbon ferrochrome: decreased by 43.3%, medium carbon ferrochrome: decreased by 48.5%, high carbon ferrochrome: decreased by 44.6%, silicochrome: decreased by 72% and total: decreased by 45.5%.

According to the recent investigations by analysts and South African producers, the world output of crude stainless steel in the calendar year of 2009 is estimated to be 24.20 million tonnes by a decrease of 8.4% from that of 26.40 million tonnes produced in the preceding year of 2008, because China is expected to produce 8.00 million tonnes of crude stainless steel in 2009 as compared to 6.94 million tonnes produced in 2008.

Source: Steel Guru

Saturday, August 29, 2009

Lack Of Direction In Chinese Steel Prices

Securities Daily reports that some steel product EXW prices have gone beyond spot prices, an abnormal phenomenon that has come about because big steel producers have no inclination to cut prices.

Analyst believed that although some leading steel producers have an undeniable influence in pricing, they have to abide by the rules of the market.

Shagang, China's largest rebar producer, announced it was raising rebar EXW prices by another CNY 50 per tonne last week just after its price improvement of CNY 600 per tonne made earlier this month. Baosteel has also moved up the price for a second batch of carbon steel for September delivery and of HR&CR product prices by around CNY 600 per tonne. Their price adjustments have not been accepted by the market in spite of their prestige in the industry, which could be testified by the sharp diving steel prices in the domestic market in the past two weeks.

Futures followed hot on the heels of the spot market with rebar presenting a deep downtrend in the past two weeks after climbing up to CNY 4982 per tonne on August 4th and then falling to around CNY 4400 per tonne. What deserves attention is that domestic small and medium steel mills keep a wary eye on the price adjustment with an anticipation to expand their market shares.

Statistics showed that 60 wire rods and rebar producers made price adjustments last week, most of which moved their offers down according to market changes, in contrast to leading suppliers such as Baosteel and Shagang.

Analyst tbelievethat the steel price loss is mainly attributed to most steel producers' moves in adjusting EXW prices downwards given the market changes, apart from the part reason as dwindling end demand and speculation.

Market Department Director Lijian with Ma'anshan Iron & Steel Company said wire rod and rebar, characterized as low value added and acute competitive varieties, lacks concentration in industry, let alone monopoly and there is no nationwide steel mill which has the authoritative pricing power on these items. That may explain the sharp up and down of the market.

Source: Steel Guru

Friday, August 28, 2009

Maoists Threaten Iron Ore Mining In Chhattisgarh

The growing activities of Maoists in Bastar in Chhattisgarh are threatening iron ore mining in a sprawling forested region that accounts for a fifth of all iron ore deposits in India. Businessmen and politicians fear that the authorities might end up ceding control of Bastar's ore reserves in five to seven years if the dominance of the area by the insurgents is not checked urgently.


Tata Steel and Essar Steel are set to mine iron ore in the region to feed their upcoming integrated steel plants in the tribal-dominated Bastar, which is spread over 40,000 sq km and is vastly underdeveloped.


The Bhilai Steel Plant of the Steel Authority of India Ltd (SAIL) is also set to extract iron ore in Bastar. Its lone source of the raw material, at Dalli Rajhara in Chhattisgarh, has stocks to last barely four years.


The worst sufferer will be the National Mineral Development Corp (NMDC), the country's largest iron ore producer and exporter in the public sector. NMDC produces roughly 80 percent of its 27-million-tonne annual iron ore output from Bailadila reserves in Dantewada, a stronghold of the Communist Party of India-Maoist (CPI-Maoist).


"Maoists have been expanding their influence in Bastar since they first stepped into the region in the early 1980s. They have a monopoly in the interiors of Bastar," Manish Kunjam, former legislator of the Konta assembly constituency, told IANS.


"The day when they (Maoists) decide to stop mining in Bastar, they will do it easily as they enjoy the support of the tribal population," he added.


Kunjam, president of the All India Adivasi Mahasabha, an umbrella grouping of tribal organisations, pointed out that Bastar's locals were left out of the development story for decades.


"Now they are being driven out from their soil, jungles, to make way for industries such as Tata Steel's five- million-tonne per annum (mtpa) steel project in Bastar district and Essar Steel's 3.2 mtpa plant in Dantewada. Their democratic protests are not heard. Now their anger is resulting into sympathy with Maoists," he said.


Tata Steel will excavate iron ore for its Rs.100 billion Lohandiguda plant in Bastar while Essar has a Rs.70 billion project.


Noted businessman Anil Nachrani, president of the Chhattisgarh Sponge Iron Association, said: "The future of Indian industry is based on the growth of the steel industry. The situation in Bastar is alarming. The government can't take it lightly; otherwise the country will suffer heavily.


"The situation will be more critical in the coming years in Bastar. Maoists can't be eliminated. I suggest that the government should try its best to solve the problem through dialogues rather than at gunpoint," he added.


Admitting that the Maoists were terrorizing mining companies, Director General of Police Vishwaranjan told IANS: "Maoists are trying to scare off miners in Bastar's interiors, mainly in areas where private companies are excavating iron ore. But the Maoists will not succeed."


He said: "Police are well aware of the threat to iron ore mining in Bastar. Police presence around the mining facilities will be strengthened heavily. We are expecting more paramilitary battalions."


But former chief minister and Congress leader Ajit Jogi says: "If the same trend of misunderstanding the Naxal (Maoist) problem continues, we will soon lose sovereignty over Bastar iron ore that is finest in quality the world over."


The Indian government has injected thousands of paramilitary troopers into Bastar to take on the Maoists. Chhattisgarh has witnessed roughly 1,500 casualties in Maoist violence since it came into existence in November 2000. More than 95 percent of all deaths have been reported from Bastar.

Source: Samay Live

Ore Miner Cuts CISA Out Of Talks

One of the "big three" iron ore producers has cut China's national ore negotiating body out of the equation, electing to deal directly with steel makers that want to buy its products.

The move will heap more pressure on the China Iron and Steel Association (CISA), which had hoped to reach a deal in June.

Now, there is speculation that the overdue deal may not be reached at all this year.

The chief executive of Brazilian iron ore mining firm Vale, Roger Agnelli, said the company expected to keep offering provisional prices on ore shipments.

Vale agreed to grant Chinese steel mills a 28 percent discount on the 2008 benchmark price in provisional contracts until new term prices are settled, said Hu Kai, a steel analyst from Umetal.

CISA rejected the 28 percent cut when it was offered at the talks in May, when it is pushed for a larger cut. The 28 percent cut was, however, accepted by Japanese and South Korean steel mills.

"The protracted talks seem endless this year," said Xu Xiangchun, a director at Mysteel consultancy. "Since both miners and the CISA are sticking to their guns, the 2009 benchmark price might be suspended and agreement sought next year."

CISA managed to get a 35 percent price reduction from Australia's third iron ore miner, Fortescue Metal Group (FMG), on Aug 17. It called for the same deal from the 'big three' - Vale, BHP and Rio Tinto.

None agreed.

CISA had earlier refused to budge from its call for a 45 percent discount.

"We don't see this pricing agreement as relevant to our pricing for fiscal 2009," Gervase Greene, a spokesman for Rio Tinto, said last week.

A senior executive of BHP China told Chinese media the company also would not agree to the same price as FMG.

"We imported iron ore from Australia or Brazil miners at the benchmark price that they offered to Japan and Korea, but if the benchmark price is finalized with China, we will be refunded or charged by the miners according to the difference," said an anonymous source from a large Chinese steel mill.

The annual price talks between the three global iron ore miners and China's steel industry have been deadlocked for months after China refused to accept the 33 and 28 percent cuts offered by Australia miners and Brazilian miner Vale, respectively.

"If you have a contract (that) is being honored, you sell, you receive, what do you need to negotiate?" asked Agnelli. "Everything is fine ... We're not negotiating anything."

Agnelli said the accord was "evidently fair" since spot prices "were much higher than contract prices" and the company was honoring the provisional contracts.

"The tough attitude from the three global miners means they will not accept CISA's proposal and they are quite bullish on the Chinese market. The demand is always there," Hu said.

China's crude steel output could hit a record in August. Data from CISA showed daily production ran at 1.67 million tons in the first 10 days of the month, up 10 percent on early July.

SourcE: China Daily

Baosteel Take Stake In Aquila

Western Australia-based explorer and producer Aquila Resources Ltd has reached a strategic co-operation agreement with the Chinese steel giant Baosteel to develop its iron ore, coal and manganese projects.

Under the deal, Baosteel will take up to 15 per cent of Aquila, investing up to $286 million in return for as many as 43.95 million shares in Aquila.

Baosteel will work with Aquila to develop the Australian company's steel raw materials projects, including iron ore, coal and manganese.

"The strategic co-operation that has been established by the signing of these two agreements is expected to deliver significant long-term benefits for both Aquila and Baosteel, and significant benefits to both Australia and China," Aquila said in a statement on Friday.

"This is a transforming event for Aquila. China's largest steelmaker has established a strategic cooperation with Aquila, not only to make a major investment in the Company, but also to advance participation in some of the important projects in the Company's portfolio.

"For Baosteel, this represents its first major international strategic investment in a public company and is an important transaction in Baosteel's strategy to secure long-term supply of critical steel raw materials for its steel making business."

Under the deal, Baosteel will take up to 15 per cent of Aquila by paying as much as $285.6 million for as many as 43.95 million shares at $6.50 per share.

Aquila's shares shot up when they resumed trading on the Australian stock exchange on Friday, following the release of the statement, rising 73 cents, or 11.15 per cent, to $7.28 by 1013 AEST.

Aquila said Baosteel would work with it to source low cost financing from Chinese financial institutions for its major projects, and Baosteel would get preferential opportunity to invest directly in and develop those projects.

Baosteel vice president, Dai Zhihao, has been nominated to join the Aquila board.

The deal depends on regulatory approvals both in Australian and China, including from the Foreign Investment Review Board.

Aquila said the placement with Baosteel would give it "significantly greater capacity to accelerate (its) steel raw materials asset portfolio.

"This is an important step in executing Aquila's vision to become one of Australia's leading globally diversified steel raw materials producers," the company said.

Aquila is a minerals explorer focussing on coal and iron ore in Australia and overseas.

Aquila also produces coal from its Isaac Plains Project in the Bowen Basin, in central Queensland.

Aquila said the Baosteel deal would underwrite the delivery of key projects in iron ore, metallurgical coal and manganese.

Projects include West Pilbara in WA and Thabazimbi, in South Africa (both iron ore), three coal projects at Isaac Plains, Eagle Downs and Washpool, in Queensland, and the Avontuur manganese project, also in South Africa.

The deal will deliver "significant new supplies of iron ore, coking coal and manganese" to Baosteel.

"The involvement of Baosteel now paves the way for Aquila to pursue its strategic vision in drawing together supply through its interests in the West Pilbara Iron Ore Project and shipping through the planned Anketell Port," Aquila said.

"Aquila and Baosteel will work towards establishing a joint sales arrangement to assist in the distribution of the Company's, and potentially Baosteel's share of production, from these key projects throughout the Peoples Republic of China.

"Aquila and Baosteel have also agreed to work towards the establishment of long-term raw material off-take arrangements from these projects, once they are developed and in production."

Source: WA Today

Thursday, August 27, 2009

Nanjing Steel Postpones Indonesia Plant

The Jakarta Post reports that Chinese steel maker Nanjing Iron and Steel Company is likely to postpone plans to build an iron factory on Kalimantan Island until the global economic crisis ends.

Mr I Gusti Putu Suryawirawan, the Industry Ministry’s director for the metal industry said "Nanjing Iron had previously opened a branch office here but then closed it down because of the crisis."

He said that “But it seems that they still want to invest here, while waiting for the crisis to be over. Despite that, we will keep prioritizing Nanjing Iron in our national steel investors’ list.”

Mr Putu said Nanjing planned to build the factory either in South Kalimantan, or Central Kalimantan, by partnering with local firm PT Semeru Surya Steel.

Source: Steel Guru/Jakarta Post

Highveld Sees Improved Steel Demand

South African steel producer Highveld Steel & Vanadium on Wednesday said that it could increase its operational levels systematically to full production during the later part of the year, if higher demand levels continued.

The producer, led by CEO Walter Ballandino, said that there were some signs of improved demand, particularly for steel, and that the company would have to position itself to ensure that the increased demand could be met in a profitable manner.

It expected the upswing in demand to be gradual.

In the six months ended June 30, 2009, the company’s headline earnings fell by nearly 89% to R145-million, compared with headline earnings of R1,29-billion recorded the year before.

Revenues declined by 51% and headline earnings a share from continuing operations by 86%.

Highveld’s gross steel output declined by 35% year-on-year in the six months, while total sales volumes were down 25% year-on-year in the six months.

However, sales of casted products in the six months had increased to 117 743 t, the majority of which was exported, compared with 2 084 t sold in the first half of 2008, of which none had been exported.

Overall, export sales had increased “dramatically”, accounting for 53% of total steel sales in the first half of the year, compared with 9% the year before, as a result of weak domestic demand and extensive destocking by local merchants, said the steelmaker.

Meanwhile, the company noted that its vanadium slag production had declined in line with its steel production.

Vanadium prices had, however, recovered somewhat during the past few months, with the average ferrovanadium price for June improving to $22,56/kg, compared with $18,96/kg the year before.

Meanwhile, the producer said that depressed markets and significant variations in exchange rates remained dominant business risks, while the supply of services to the eMalahleni municipality, in Witbank, also remained a business risk that required continuous monitoring.

Source: Mining Weekly

Wednesday, August 26, 2009

Kazakhstan Releases Jan To July Steel Statistics

According to data released by the Republic of Kazakhstan’s Agency of Statistics, in January to July 2009 the country registered an 18.8% decrease in its crude steel production and a 7.9% decrease in its production of flat rolled steel all compared to the data for January to July 2008. The respective figures in metric tons were 2.230 million and 1.730 million.

During the first seven months of 2009, Kazakhstan output of ferroalloys declined by 24.4%YoY to 762,716 tonnes.

Source: Steel Guru

China Smelter Shutdowns Sends Lead To 11-Month High

Lead prices rose to an 11-month high on Tuesday as more Chinese smelters shut amid an industry-wide clampdown by Beijing following incidents of lead poisoning.

China is the world's largest producer and consumer of the toxic metal used to manufacture car batteries.

The smelter shutdowns in Shaanxi province now threaten to extend to Hunan and Guangxi provinces as authorities widen checks on pollution controls at the plants.

The official added that possible closures of lead smelters would depend on the findings.

Robin Bhar, a senior metal analyst at Calyon in London, said about 400,000 tonnes of smelting capacity -- equal to almost 5 per cent of global production -- have been forced to shut indefinitely in China because "they did not meet national environmental standards".

On the London Metal Exchange, lead for delivery in three months rose to an intraday high of $2,068 a tonne, its highest since last September.

In late trade, lead rose 2.7 per cent to $2,055 a tonne. Lead prices surged 6.8 per cent the previous day.

"The lead market is fundamentally one of the tightest, with supply and demand roughly balanced and global inventories relatively low," Mr Bhar said.

Lead prices have surged 110 per cent from $980 in January helped by the recent surge in car sales.

Analysts said the smelters' closure will push China to import more, particularly in the fourth quarter when the seasonal upswing in consumption gets underway.

Source: CNN

Hwange Colliery Resumes Coke Production

Hwange Colliery Company resumed coke production yesterday with its battery discharging 60 tonnes of the critical input for metallurgical industries.

It is a gradual recommissioning process that will see the 22-year-old plant operating at full capacity next week.

The battery stopped working in February this year after most of its 32 ovens ceased operating.

Hwange, the largest coal miner in Zimbabwe, had engaged consultants from Arcelor Mittal, the world’s largest steel marker, Forosbel Africa (Private) Limited of South Africa and the Zimbabwe Iron and Steel Company. The companies use coke in their production process.

"We have already pushed (discharging coke) from six ovens and we are hoping to operate at full capacity by the end of next week," HCCL spokesperson Burzil Dube said.

He said the plant, key to the survival of the colliery would produce at least 18 000 tonnes a month when operating at full capacity.

HCCL marketing manager, Mr Charles Zhou said the company would now focus on resuscitating lost markets when the plant was down.

"Our customers never stopped operating because Hwange was unable to supply.

"This means that they were getting the product from somewhere else. Now that the product is available, Hwange will work to revive traditional markets and we are hopeful that we will be able to regain them," Zhou said.

Hwange Colliery markets coke in three broad categories namely foundry coke, metallurgical and coke peas.

Hwange used to supply coke to South Africa, Mozambique, Zambia and the Democratic Republic of Congo.

The initial stage under the resuscitation had been charging tar into the oven to achieve an average of between 800 and 1 000 degrees Celsius.

This was followed by infusion of liquefied petroleum gas that culminated in temperatures rising above 1 050 degrees Celsius suitable for burning coking coal to produce coke.

The coke oven battery was commissioned in 1987 by a British company, Otto Simon Carves.

Source: Zimbabwe Herald

Ivanhoe Share Price Rises On Mongolia Agreement

Ivanhoe Mines Ltd. share price rose to its highest price in almost a year in Toronto after saying changes to Mongolia’s laws will help it complete an investment agreement on the Oyu Tolgoi copper-gold project “in the near future.”

Mongolia’s lawmakers approved amendments that will eliminate a three-year-old, 68 percent windfall profit tax on copper and gold effective Jan. 1, 2011, Vancouver-based Ivanhoe said today in a statement. Ivanhoe has tried for more than six years to reach an agreement with Mongolia to develop Oyu Tolgoi and benefit from demand in China, the biggest metals buyer.

“This is it,” Dale Choi, an economist at Frontier Securities in Ulan Bator, said in a phone interview today. “Parliament had been the stumbling block” in allowing concessions sought by Ivanhoe and development partner Rio Tinto Group, which include elimination of the windfall tax and rights to build roads and use water, Choi said.

Oyu Tolgoi is about 80 kilometres (50 miles) north of Mongolia’s border with China. Ivanhoe in March 2008 estimated the copper resources in the project at 78.9 billion pounds and the gold resources at 45.2 million ounces. London-based Rio Tinto called Oyu Tolgoi “the world’s largest undeveloped copper-gold resource” when it agreed to buy 10 percent of Ivanhoe in 2006.

“This expression of confidence in Mongolia’s future clears the way for finalization of an agreement with the government for the construction and operation of Ivanhoe’s Oyu Tolgoi copper- gold complex,” Ivanhoe Chief Executive Officer John Macken said in the statement. “We are in a position to make arrangements with the Government to sign the Oyu Tolgoi Investment Agreement in the near future.”

Rio said in a separate statement that production “is expected to commence as early as 2013 with an approximate five- year ramp-up” to full capacity. Oyu Tolgoi’s average production capacity over the entire mine life is estimated at 450,000 metric tons of copper per year and 330,000 ounces of gold, the company said.

Copper for delivery in three months on the London Metal Exchange has doubled this year, partly on government stimulus spending and stockpiling in China. Copper fell 1.8 percent to $6,311 a ton today on the LME.

Oyu Tolgoi “is right next to the consumer of all of the copper concentrate the companies can produce there,” Frontier’s Choi said.

Refined copper imports by the Chinese more than doubled to 1.78 million metric tons in the first half and reached a monthly record of 378,943 tons in June, customs data show.

China’s manufacturing expanded for a fourth month in June as a 4 trillion yuan ($585 billion) government stimulus package and record bank lending revived the world’s third-largest economy. Inflation concerns and economic growth of 7.9 percent in the second quarter also boosted demand for commodities.

Under a 2007 draft investment agreement for the project, the Mongolian government would have had the right to a 34 percent equity stake in the project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said in February 2008.

Neither company’s statement today said how large the Mongolian government’s stake will be.

Ivanhoe spent $156 million on exploration and development at Oyu Tolgoi, the company said in an April 1 statement. Engineers at the site completed the construction of a shaft to a full planned depth of 1,380 meters in February 2008.

Source: Bloomberg

Coal India Proposes 10 Per Cent Price Rise

Coal India Ltd (CIL) has proposed a 10 per cent (or around Rs175 per tonne) hike in coal prices to bridge the widening gap between production costs and prices of domestic coal.

Coal prices in India at present range between Rs770 and Rs1,700 a tonne and at that level these are over 50 per cent cheaper compared with international prices of coal.

Coal India chairman Partha S Bhattacharyya said the hike has been necessitated by a major wage revision that resulted in over Rs4,000 crore additional financial burden on the company.

CIL was free to fix the prices of all grades of coal in relation to the market prices with effect from 1 January 2000. CIL fixes the prices of deregulated coal from time to time and the last such revision has been made on 12 December 2007. CIL has not increased prices since then.

The government started deregulating coal prices beginning with those of grades A, B and C, coking coal and semi/weakly coking coal non-cocking coal as far back as on 22 March 1996. Subsequently, on 12 March 1997, the government deregulated the prices of non-coking coal of grade D, hard coke and soft coke and also allowed Coal India Ltd to fix coal prices for grades E, F & G till January 2000, once in every six months, by updating cost indices as per escalation formula contained in the 1987 report of the Bureau of Industrial Cost & Prices.

Coal India fixes the basic price of coal grade wise at the pit-head excluding statutory levies for run-of-mine (ROM) for non-long-flame coal, long flame coal, coking coal, semi coking coal and weakly coking coal, direct feed coal and Assam coal from various subsidiaries of CIL.

The price hike, though minor, is likely to push up costs for industries like cement, steel and power, where coal is a key input.

The government, meanwhile, is looking overseas to bridge the domestic shortfall in high-grade coal.

Union minister of state for coal Sriprakash Jaiswal would be leaving for Australia soon to pursue acquisition of coal assets there.

Coal Videsh, the overseas arm of Coal India Ltd, has already acquired two exploratory blocks in Mozambique and is looking at joint development of coal assets in Australia with companies there.

The country currently produces 450 million tonnes of coal, including 400 million tonnes by Coal India Ltd. It would still need to import 70 million tonnes to bridge the projected 25 per cent shortfall by next year.

India uses coal to fuel thermal power stations of a total generating capacity of over 77,000 MW of power, or half of the country's total installed generating

Source: domain B

Tuesday, August 25, 2009

Iron Ore Spot Prices "May Fall To $70 A Tonne" - NMDC

Cash iron ore prices may fall to about $70 a metric ton in the “near term” as China, the world’s biggest buyer, cuts purchases, said Rana Som, chairman of NMDC Ltd., India’s top producer of the steelmaking material.

“This could happen in a few days,” Som said in a phone interview from the southern city of Hyderabad, where NMDC is based. The forecast is 26 percent lower than this year’s peak rate of $95 without freight earlier this month, according to Macquarie Securities Ltd.

China’s stockpiles of iron ore to make steel are at 75 million tons, just 0.6 percent below levels last September, when they rose to the highest since at least 2006. The cash price for Australian iron ore delivered to China slumped 9.3 percent on Aug. 21 after Chinese steel prices declined.

Ore prices have likely “topped out” this year as steel prices fell, Liberum Capital analysts said on Aug. 17. The Baltic Dry Index, a measure of commodity-shipping costs, fell 27 percent this month on concern demand may be slowing.

Iron ore swaps for settlement this month traded at $98.31 a ton yesterday, according to SGX AsiaClear over-the-counter prices from Singapore Exchange Ltd. They indicate prices may drop to $87 by December.

Demand in India remains strong even as global sales slide, Som said. NMDC’s sales will rise more than 13 percent this financial year because of demand from local steelmakers, he said last month.

India’s steel production climbed 4 percent to 18.7 million tons in the four months ended July 31, Steel Secretary Pramod Rastogi said on Aug. 6.

NMDC shares, which more than doubled this year because of the government’s plan to sell a stake in the company, rose as much as 1.9 percent to 366.60 rupees and traded at 364.60 rupees, up 1.3 percent, as of 1:17 p.m. local time.

Source: Bloomberg

ArcelorMittal In Ukrainian Ferroalloy Dispute

The Ukrainian steelmaker ArcelorMittal Kriviy Rih announced that its refusal to prolong a contract for ferroalloy deliveries in the context of its reduced production rates has led its main ferroalloys supplier Zaporozhye Ferro Alloys Plant to take an action for the legal collection of about UAH 205.59 million from the company for pre payment for future ferroalloy deliveries as ZZF insists on prolongation of the contractual partnership.

On July 15th 2009, the court of first instance in the Dnepropetrovsk region satisfied the stated claims in relation to payment of these funds in favor of ZZF.

However, alleging that judgment was accepted with gross violation of Ukrainian laws and improper use of material and legal practice of Ukraine, ArcelorMittal Kriviy Rih has appealed to the Dnepropetrovsk economic court relating to the right of ZZF to continue deliveries to the enterprise in conditions of validity of force majeure circumstances, ie the global economic crisis.

ArcelorMittal Kriviy Rih halted purchases of ferroalloys from ZZF in the last quarter of 2008 citing the significant reduction of its production rates.

Source: Steel Guru

Philippine Mine Investments Hits Halfway Point

The Philippines governments mining investments as of this month are nearly halfway to its $650-million scaled-down full-year target, the chief of the Mines bureau said yesterday.

"At this time, [mining investment] is $300 million," Horacio C. Ramos, director of the Environment department’s Mines and Geosciences Bureau, told reporters yesterday.

"This year, our projected [investment] is $650 million, but because of the delay in other investments, I do not know if we can still attain it."

For instance, the completion of the feasibility study of Japanese Sumitomo Metal Mining Co. Ltd. and holdings firm Nickel Asia Corp. for a $3-billion nickel ore processing plant in Surigao del Norte was moved to late this year or early next year.

However, the country’s mining industry group remained confident of reaching the $650-million investment target, citing the recovery in metal prices that has encouraged investors.

"With a few months towards the end of the year, I think [the government] can attain the investment target," Nelia C. Halcon, executive vice-president of the Chamber of Mines of the Philippines, said in a phone interview.

"For as long as the demand is there — and I think the demand [for metals] will be there in the next three to five years — that will be the driving force for investors to pursue their projects."

The original $800-million to $1-billion investment target set at the start of the year was pared down to $650 million after disappointing first quarter data.

In the first quarter, investments in mining reached only $11.16 million, though Mr. Ramos stressed that this was because companies did not report capital spending on time.

For investments this year, Swiss mining giant Xstrata Plc and Oslo-based miner Intex Resources ASA have contributed about $50 million and $30 million, respectively, for their feasibility studies, Mr. Ramos said.

As of this month, mining investments have totalled $2.1 billion since 2004, when the Supreme Court allowed complete foreign ownership of mining ventures, data from the Mines bureau showed.

The government targets $11 billion in mining investment by 2013.

Actual investments in the mining industry last year reached $577.25 million, lower than the $1-billion target for that year and $679.65 million in 2007.

Mr. Ramos said mining is recovering, as shown by rising nickel, gold and copper prices.

"The world economic condition is already recovering. China and the United States are recovering and the price is increasing," Mr. Ramos said.

Prices of gold, copper and nickel have so far increased to about $960 per ounce, $2 per pound, and $8 per pound, respectively, from an average of $907 per ounce, $1.70 per pound and $6 per pound in the first quarter.

"There are many inquiries for gold and copper [projects] because gold is fetching good prices in the world market and copper prices are undergoing corrections," Ms. Halcon said.

Mr. Ramos concurred, saying that "low prices are over. Our only problem is peace and order and the misconceptions on mining."

Value of mineral output this year is expected to go up to about P98.7 billion from last year’s P87 billion, driven by a new gold mine and increased production in four gold and copper mines, said Mr. Ramos.

"With the entry [sic] of five companies, our production volume will increase by 10% as compared to last year," he said.

Australian CGA Mining, Ltd. and local unit Filminera Mining Corp. began gold production in a $250-million project in the Bicol region last May which will produce 200,000 ounces of gold per year.

Australian Medusa Mining, Ltd. increased in June the annual gold production in its Agusan del Sur property to 60,000 ounces per year from 45,000 ounces.

Listed Atlas Consolidated Mining and Development Corp. will also increase the daily milling capacity of its Toledo gold and copper mine in Cebu this month to 35,000 metric tons of ore from 25,000 MT.

Sumitomo also doubled the capacity of its Palawan nickel mine to 20,000 MT per day in March, while the Rapu-Rapu Mining, Inc. is already producing 50,000 ounces of gold per year from its mine in Albay, Mr. Ramos said.

"That [mineral output value rise] is a fair estimate because prices of gold are still high and even [that of] copper," said Ms. Halcon.

The value of local mineral production dropped by 8% in the first quarter to P15.6 billion from P16.95 billion year-on-year amid dampened prices in the world market, data from the Mines bureau showed.

Source: Business World Online

Ferroalloys Corp To Invest US$30mn In Zambia Plant

Ferro Alloys Corporation Limited has invested 30 million U.S dollars in setting up a Manganese plant in Kabwe, Zambia.

Company Managing Director, Rajnish Gupta says the plant will be producing 200 tones of ferro-manganese, a component used in the manufacturing of steel.

He was speaking when Zambia's Commerce Minister, Felix Mutati, toured the project site in Kabwe.

And Mr. Mutati said government will continue providing incentives to encourage companies to invest in Zambia.

Source: ZNBC

Pike River Delays Exports From NZ Coal Mine

The first 60 000-t export shipment from ASX-listed Pike River Coal’s new mine has been delayed until the January-March quarter in 2010.

The miner initially planned to export its first coal from the Pike River mine, in New Zealand in mid-November.

Pike River Coal stated on Monday that production of premium hard coking coal from its new mine has been running at lower-than-expected rates, owing mainly to early geological complexity and machinery difficulties, resulting in slower roadway development driveage.

“The first 60 000-t export shipment, scheduled for mid-November 2009, will unfortunately be further delayed while the pit-bottom development roadways are extended to the area where first coal will be mined by hydro-monitors,” the company said in a statement.

The first hydro coal was expected in the April-June 2010 quarter.

“The Pike River mine has overcome many challenges to get into operation, and while the current delay is frustrating for investors, customers and staff, it is an issue that many new mines have to face and work through. Most of the hard work has been done and investor patience is set to be repaid, with Pike River producing low-ash coal at a time of rising global demand,” said Pike River Coal CEO Gordon Ward.

The underground coal handling facilities at Pike River have been commissioned and pit-bottom is continuing to be developed with a combination of coal and stone drives. The three new coal cutting machines have been largely repaired and modified, with the remaining outstanding modifications being replacement of tracks on the two continuous miners by the German manufacturer.

Both 60-t machines were currently operational, but repairs, including track work, has resulted in considerable production downtime, during the past month.

Other main factors limiting production over the past month, have included the unavailability of some underground coal and rock haulage machines, owing to breakdowns, a greater level of roof support being required owing to the proximity of the Hawera fault, and the need to familiarise new staff with machinery and mining practices.

Pike River Coal stated that the countermeasures taken by the company included more intensive maintenance, intensified operator training, and changes to underground work practices following internal and third-party review.

“The mine is working two shifts, 24 hours a day, seven days a week in order to meet our production targets, and all Pike River’s management and staff are focussed and committed to this outcome,” Ward noted.

Source: Mining Weekly

Namisa Expects Iron Ore Production To Top 39mn Tonnes By 2013

Namisa, the iron ore mine controlled by Brazilian steelmaker CSN, will invest up to 4 billion reais ($2.2 billion) to help increase production to 39 million tonnes by 2013, its chief executive told Valor Economico newspaper.

Charles Putz, 48, the American-Brazilian executive in command of the mining company, said production at its Fernandinho and Engenho mines, close to the Casa de Pedra iron-ore complex, will reach 9 million tonnes this year, Valor said on Monday.

Net revenue should reach 1.5 billion reais, or 40 percent more than last year, when the mine sold 9.5 million tonnes of the metal. Putz said Namisa's focus is to place its iron-ore primarily in Europe and Asia, according to Valor.

The investment plan will also help supply Namisa with ore from Casa de Pedra starting on 2012, the newspaper said. The company will build a facility next to Casa de Pedra to refine the ore extracted from the mine, Putz told Valor, adding the plant should be ready by the end of 2012

By the end of 2013, Namisa's production will be comprised of 13 million tonnes from its own mines, 20 million tonnes from Casa de Pedra and the remaining 6 million tonnes from neighboring miners, Putz told Valor.

Part of the investments will be funded with loans from the Brazilian state development bank, known as BNDES, and the JBIC, the Japanese development lender, Valor said.

CSN owns 60 percent of Namisa. Japanese trading company Itochu and six Japanese steelmakers bought at 40 percent stake in the miner for $3.08 billion last December.

Source: Reuters

Rebar Prices Rise In UAE

Rebar prices in the UAE continued to increase, as domestic prices remained above $530 per tonne. Import prices, especially from Turkey, have also been going up compared to last week.

Turkish firms are booking rebar to UAE customers at $520 per tonne compared to $515 during the second week of August, a representative of a leading trading company told Emirates Business.

However, demand for steel continues to remain low within the UAE, and especially in Dubai, as many construction projects that have been cancelled or put on hold are yet to take off.

Traders yesterday said that the main reason for the rise in prices is the increase in the cost of scrap and billets.

According to Ajay Aggarwal, CEO of RAK Steel, local prices of steel continue to remain strong and would remain so for some time to come. "Right now we have been selling at $530 per tonne. The demand continues to remain the same as before, and it has not increased much," said Aggarwal.

Meanwhile, according to Karel Costenoble of Mesteel, demand in the UAE in general has been low and will continue to be so during the coming weeks. "Especially now that it is Ramadan, it is going to be a period of low activity. The market is not expecting any spurt in demand soon," said Costenoble.

"In the GCC, however, the market in Saudi and Qatar is a bit better but otherwise the regional market is low as many as projects are either shelved or postponed," he said.

According to him, the increase in Turkish rebar prices is mainly due to increase in the prices of scrap and billets. "We are not sure for how long the prices will continue to increase," he said.

According to a Metal Biz report, small steel mills in Turkey had to increase the imported price of steel scrap due to the strong demand in Far East area, in a bid to compete with the foreign buyers and ensure production.

The mix heavy scrap for September delivery lifted import prices from last week's $300 and $305 per tonne to $310 and $315 per tonne, with an increase of $15 per tonne. The shred scrap settled price increased to between $315 and $320 per tonne from $305 and $310 per tonne last week.

The price rise of steel scrap did not prevent Turkish small steel mills to import from the US and Europe. Turkish steelmakers also said the consumption of blast furnace steel scrap increased 10 per cent to 18 per cent. Previously, Turkey expected to repurchase after the price dropped and predicted it would decrease to $250 per tonne but rates showed an upward tendency.

Affected by the price rise of scrap steel, Turkish mills were forced to increase the price of square billets and long products. The square billet price rose to between $450 and $460 per tonne from last week's $440 and $450 per tonne. Rebar export prices increased by $20 per tonne to between $500 and $510 per tonne from $490 per tonne last week. The offer has even reached $520 per tonne but deals are yet to be concluded, said the report.

Meanwhile, according to Costenoble, prices of structural steel remains stable. "Beams are priced at around $650 to $700 per tonne," he added.

And Chinese prices are starting to come down for certain products, he said. "They had gone out of competition as the prices went up and although it has still not become competitive, prices are slowly going down showing signs that prices will soon fall further," he said.

"Some of it has become competitive though. The i-beams are priced at $630 per tonne coming down from $680 per tonne two weeks ago. Therefore they have definitely become competitive. Similarly the price of channels is now below $600," he added.

But when it comes to rebars, the Chinese are not yet competitive, said Costenoble. "Anybody who buys Chinese steel would expect it to be about $40 to $50 cheaper compared to Turkish or other steel products," he said.

Meanwhile, crude steel production for the 66 countries reporting to the World Steel Association (Worldsteel) in Brussels, was 103.9 million metric tonnes in July, marking the highest monthly production figure this year.

The July total jumped by more than four million metric tonnes compared to June production. However, compared to July 2008, the world's steel production was 11 per cent lower in July 2009. In June, global steel output reached 99.8 million tonnes, up from May's production of 95.6 million tonnes.

In July, almost all the major steel producing nations – including China, Japan, Germany, the United States, Brazil, Turkey, Russia and Ukraine – reported their highest monthly figures so far in 2009.

Total crude steel production in the reporting countries for the first seven months of 2009 was 653 million metric tonnes, a 20 per cent decrease over the same period in 2008.

The Middle East's production increased from 1.3 million tonnes in June 2009 to 1.432 million tonnes in July. Compared year-on- year, July's production in the region where data was collected (Iran, Qatar and Saudi Arabia), the production went up by about 2.5 per cent. The three countries put together produced about 1.27 million tonnes of steel in July 2008.

During the first seven months of 2009, the three countries in the region produced about 9.67 million tonnes of steel compared to 9.615 million tonnes of steel during the same period last year, registering a 0.6 per cent increase.

China's crude steel production for July 2009 was 50.7 million metric tonnes, 12.6 per cent higher than July 2008. It is the first time ever that China produced more than 50 million tonnes of crude steel in a month, accounting for almost 50 per cent of world crude steel production. Since April 2009, China's crude steel production has shown a steady month-on-month increase.

Elsewhere in Asia, Japan produced 7.7 million metric tonnes of crude steel in July 2009, down by -24.9 per cent compared to the same month last year. South Korea showed a decline of -13.3 per cent from July 2008, producing four million tonnes of crude steel in July 2009.

In the EU, Germany's crude steel production was 2.7 million metric tonnes in July 2009, a decrease of -28.8 per cent from July 2008. The UK produced 0.8 million tonnes in July 2009.

Source: Emirates Business

China Coal Imports Down 14% In July

China's coal imports dropped 14% from the previous month to 13.88 million tons in July due to a rebound in international coal prices, according to statistics released by the General Administration of Customs today.

China imported a record 16.07 million tons of coal in June. The country's coal imports rose for the first six months of this year, boosted by lower international coal prices.

Imports of coking coal in July increased 6% month on month to 4.9 million tons, which accounted for more than one third of the country's total coal imports last month.

The nations' coal imports are expected to experience sharper declines in August and September, said industry analysts.

In the first half of this year, the nation's total coal imports surged 126.33% from a year earlier to 48.27 million tons, while total coal exports were only 11.67 million tons, according to earlier statistics from the GAC.

Source: China Knowledge

Iran Offers Anthracite To Ukrainian And Indian Buyers

Iran is offering anthracite coal to Ukrainian and Indian buyers for the first time due to a fall in demand domestically, traders said.

Until now Iran has not exported its high energy content, low volatility anthracite but used it internally in steel production, they said. “We have been offered Iranian material. It’s anthracite with a high calorific value but it has met coal properties so could be used for steel. But for India it doesn’t make economic sense,” one Indian trader said.

Ukrainian steel mills are more keen on the Iranian material because the Russian coking coal on which they partly depend has risen sharply in price and is in tight supply, due to the recovery in Russia’s own steel output.

Source: The Peninsula, Qatar

Iron Ore Buyers Vanish

The vagaries of the Chinese steel industry are a colloquial topic but its whimsical pattern has left many operators in the lurch. A breathtaking revival is followed by an even more catastrophic retraction within a span of two weeks.

Steel markets, which rallied continuously for 10 weeks, took less than a fortnight to crumble by CNY 900 (>10%). The crash was imminent in the absence of solid demand from vital sectors. The much-touted stimulus package, along with a slew other demand stimulants in the auto and white goods segments, definitely gave the desired thrust to the sagging industry. At the same time it was widely acknowledged that the price hike was disproportionate. Steel mills made merry feasting on this positive sentiment by upward revision of prices week on week fanning speculation and leading to stockpiles devoid of commensurate consumption.

Iron ore being a key input for steel manufacturer has a strong bearing on the steel prices and vice versa. The fairy run of the Chinese steel prices saw the iron ore prices zoom by an astonishing 64% in during this period.

As a corollary of this crash in steel prices buyers have become cautious about futures and prefer to wait rather than to indulge in any activity. In the last week there has been perceptible drop in buying of Iron ore thereby putting pressure on sellers holding on to large volumes in the run up for maximizing profits.

Iron ore prices had touched a peak of USD 110 CNF Chinese port (USD 82 per tonne FOB , East Indian Port) some deals had been reported at USD 115 per tonne, CNF, Chinese port.

After a golden run since April 23rd 2009, the iron ore spot market for exports of Indian iron ore fines 63.5/63% were trading at USD 110 plus on CIF basis, which started to show signs of softening on August 13th 2009, and has weakened by 4% to 5% during the past week.

Sentiment remain weak in the iron ore spot market as most buyers are expecting a drop of roughly USD10 per tonne by month end. The domestic selling prices for iron ore in China have also gone down by CNY 60per tonne to CNY 70 per tonne during last week and they are likely to dip further this week.

The reduction in sea freight has softened the slide in FOB levels to some extant. But the newly introduced ad valoram royalty and higher inland railway freight in India has cast doom for Indian iron ore miners.

Source: Steel Guru

BC, Fortescue In Pilbara JV

BC Iron has formally entered into a joint venture with Fortescue Metals Group (FMG) to develop the Nullagine Iron Ore Project, located in the Pilbara region.

According to the company’s managing director Mike Young, the joint venture has been formalised ahead of a planned test pit with the intention of commencing production as soon as possible.

“After discussions with FMG, both parties have agreed that forming the joint venture now is in the best interests of fast-tracking the project to production,” he said.

“The joint venture team has agreed to a minimum threshold for material from the Nullagine test pit that is comparable to the Value-in-Use for Robe River pisolite.

“Based on the results of the feasibility study and our recent marketing trip to China, we expect to well and truly surpass this benchmark.”


Construction is expected to commence later this year, so production can begin in the first half of 2010.

The project will have an initial production rate of 1.5 mtpa, which will be increased to three mtpa and five mtpa as infrastructure is upgraded.

Studies at the 120,000 tonne bulk sample test pit at the Outcamp deposit will begin in mid-September.

The process will confirm the surface miner type and performance, dilution and reconciliation, metallurgy, value-in-use and ore price benchmark determination.

The company has received native title and ministerial approval to remove the excess tonnes and is currently awaiting final approvals from the Department of Mining and Petroleum.

This is expected within the next week, the company said.

A delegation of senior BC Iron personnel visited China in July to hold meetings with four steel mills and two iron ore stockists.

The mills are currently using, or have used, the Yandi Pisolite ores that will be produced at the project and are very interested in entering into long-term sales contracts, the company said.

Source: Mining Australia

Sunday, August 23, 2009

Ore Royalty Irks Indian Sponge Iron Producers

Sponge iron manufacturers in Chhattisgarh have threatened to stop purchasing iron-ore from mining giant National Mineral Development Corporation (NMDC) if it imposes royalty on the sale and not on the production of steel making raw material.

The Union Government had recently imposed 10 per cent ad valorem royalty on the "selling price" of mined iron ore. With the new royalty structure, mineral-bearing states would pocket a good share on high quality iron ore. But the steel manufacturers feel they will be the biggest loser.

"We are demanding that the royalty be imposed on the production of iron ore and not on sale, and if it did not happen so, the steel manufacturers in Chhattisgarh will stop purchasing raw material from NMDC and private miners," Chhattisgarh Sponge Iron Manufacturers Association President Anil Nachrani told Business Standard.

The decision to this effect was taken at an emergency meeting of the association today. Besides NMDC, the local steel manufacturers are purchasing iron ore from private miners of Orissa. From the government-owned NMDC, India's single largest iron ore producer, the steel makers in the state are purchasing 3 million tonnes of iron ore per annum.

According to Nachrani, the steel industry in India is already reeling under high costs of raw material, input, logistics costs and adverse market conditions. It is in no position to even think of taking the burden of increased royalty.

The sale price of Iron ore in India is at present varying between Rs 2500-3500 per tonne. The cost for mining per tonne of iron ore comes to be around Rs 500 per cent. "The royalty is imposed on the mines and same must be borne squarely by them and absorbed in their costs," he added.

In May 2008, the Union government had imposed export duty on iron ore fines export. But the mines did not claim extra from Chinese buyers as it had nothing to do with them. Same way the royalty has nothing to do with the buyers of ore in India, he added.

The steel manufacturers said that following the royalty on the "selling price" of mined iron ore, they would have to bear an additional burden of Rs 200 for a tonne of raw material. The steel price may be up by Rs 1000 per tonne till the finished products reach to the general public for consumption.

Source: Business Standard

Indian Railways Imposes INR 200/MT Iron Ore Surcharge

Exim News Service reports that Indian Railways has imposed a INR 200 per tonne distance surcharge on movement of iron ore meant for exports. The new rates are effective from August 7th 2009.

A senior Railway Board official said that the Railways has retained the freight classification for iron ore.

Freight on iron ore is at present put in Class 180 of the Railways’ freight classification. In addition to the charges based on distance under this classification, iron ore meant for exports also attracts a surcharge ranging from 0 % to 125%.

The official clarified that INR 200 per tonne distance surcharge would be over and above the existing surcharge.

Another official said that "The changes have been done under the dynamic pricing formula being practiced by the Railways. Now that the international market is up and the freight mobilisation has increased, the levy of distance surcharge will increase our revenues. Earlier, when demand slumped, we gave incentives and discounts."

Mr R K Sharma Federation of Indian Mineral Industries’ secretary general said that "We had proposed a reclassification of rail freight for iron ore to 160 from 180, which could have brought down the freight cost by INR 250 per tonne. Instead, the Railways have imposed INR 200 per tonne distance surcharge. All these may severely impact ore exports."

He said that the railways’ freight constitutes almost one third of the total cost of iron ore. This works out to around INR 1,200 per tonne price of iron ore.

Source: Steel Guru

Vale Seeks To Offer Iron Ore CIF Prices

Brazilian mining giant Vale is reported to have changed its pricing system for iron ore exports as part of a complete overhaul of its system for delivering ore to its overseas customers, particularly in China.

Hitherto, the customer paid for the iron ore and then had to pay to ship it from Brazil, a system known as FOB. Now Vale is seeking to encourage particularly its smaller- and medium-sized Chinese customers to accept CIF pricing, in which the cost of transporting the ore is included in the price paid. Apparently, it is China’s smaller and medium sized steel companies that are the main source of demand for iron ore in that country at the moment.

Vale is able to offer the CIF option, which will allow smaller- and medium-sized Chinese steelmakers to control their costs better and which will also reduce Vale’s dependence on the spot market, because it operates its own shipping fleet, through its wholly owned subsidiary company, Docenave. Set up in 1962, Docenave used to convey iron-ore mined by its parent company to overseas customers but in 2001 Vale decided to exit the transoceanic dry bulk shipping business and had sold off most of Docenave’s ships by 2003.

The shipping company has since been focused on transporting iron ore along the Brazilian coast, on providing port services at Vale’s own terminals, and on acting as a freight desk for its parent group, arranging shipping for Vale’s complete range of export products, and not just from Brazil. It also serves as a market intelligence unit for the group, gathering information on overseas dry cargo freighting contracts. As a result, its fleet was reduced to just three dry bulk carriers, each of 151 000 DWT as well as some 19 tugs at five Brazilian ports.

Source: Steel Guru

Vale Seeks To Offer Iron Ore CIF Prices

Brazilian mining giant Vale is reported to have changed its pricing system for iron ore exports as part of a complete overhaul of its system for delivering ore to its overseas customers, particularly in China.

Hitherto, the customer paid for the iron ore and then had to pay to ship it from Brazil, a system known as FOB. Now Vale is seeking to encourage particularly its smaller- and medium-sized Chinese customers to accept CIF pricing, in which the cost of transporting the ore is included in the price paid. Apparently, it is China’s smaller and medium sized steel companies that are the main source of demand for iron ore in that country at the moment.

Vale is able to offer the CIF option, which will allow smaller- and medium-sized Chinese steelmakers to control their costs better and which will also reduce Vale’s dependence on the spot market, because it operates its own shipping fleet, through its wholly owned subsidiary company, Docenave. Set up in 1962, Docenave used to convey iron-ore mined by its parent company to overseas customers but in 2001 Vale decided to exit the transoceanic dry bulk shipping business and had sold off most of Docenave’s ships by 2003.

The shipping company has since been focused on transporting iron ore along the Brazilian coast, on providing port services at Vale’s own terminals, and on acting as a freight desk for its parent group, arranging shipping for Vale’s complete range of export products, and not just from Brazil. It also serves as a market intelligence unit for the group, gathering information on overseas dry cargo freighting contracts. As a result, its fleet was reduced to just three dry bulk carriers, each of 151 000 DWT as well as some 19 tugs at five Brazilian ports.

Source: Steel Guru

Listed Chinese Steel Mills Post Losses Of Over CNY 1bn

Securities Times reports that 15 Chinese listed steel mills have issued H1 reports with total losses of CNY 1.13 billion between them in Q2. However, the loss has decreased 51.3% from Q1.

Statistics from Wind Information show that the total loss of the 15 mills in H1 posted at CNY 3.45 billion contrasting sharply with CNY 14.81 billion earned in the same period of last year. Operating revenue also shrank. Total revenue in H1 was CNY 167.13 billion declining 32% from a year ago.

Angang Steel Co Ltd suffered losses of CNY 1.563 billion in H1, Ma'anshan Iron & Steel Co Ltd posted losses of CNY 795 million and Jinan Iron & Steel Co and Laiwu Iron & Steel Co registered losses of CNY 875 million and CNY 598 million respectively. However, Xinxing Ductile Iron Pile Co Ltd earned a profit of CNY 472 million in the period and Tangshan Iron & Steel Co and Handan Iron & Steel Co both recorded profits though they are in the process of regrouping at present.

Preparation for stock devaluation also increased and amounted to CNY 1.272 billion in H1 for the 15 mills, versus CNY 374 million from a year ago. Preparation posted at CNY 773 million at Chongqing Steel, CNY 180 million at Angang and CNY 49.53 million at Ma'anshan Steel.

Nanjing Iron & Steel predicts more than a half net decline in the first three quarters, since its H1 profit stood at CNY 55.56 million versus CNY 646 million gained in the first three quarters of last year. Analysts speculate that the company would make a profit of above CNY 200 million in Q3.

Lingyuan Iron & Steel also expects to reverse the loss-making condition in the third quarter.

Source: Steel Guru

Saturday, August 22, 2009

Newcastle Coal Prices Down 3 Per Cent

Power station coal prices at Australia’s Newcastle port, a benchmark for Asia, fell 3 percent, declining for the fourth straight week.

The index for power-station coal prices at the New South Wales port dropped $2.25 to $72 a metric ton in the week to today, according to the globalCOAL NEWC Index.

Xstrata Plc, the world’s largest supplier of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle.

Source: Bloomberg

India Considering 10% Iron Ore Duty

The finance ministry is considering a proposal from the steel ministry to levy 10% duty on exports of all classes of iron ore, a key input in steel making.

Steel ministry—the nodal agency for policy making in the steel sector—recently wrote to finance minister Pranab Mukherjee suggesting that the proposed export duty has become essential for ensuring availability of iron ore to domestic steel companies, which have been jostling for raw material for some time now.

A final decision (on export duty) will be taken by the finance minister in consultation with the Prime Minister, said a government official in one of the ministries.

The government reduced export duty on iron ore from a level of 15% (imposed in June, 2008) to 8% last year and thereafter to zero after exports plummeted. However, ore exports since then has picked up on the back of a revival in demand from spot markets in China. During the fiscal year 2008-09, India’s iron ore exports even registered a marginal 0.4% growth to 104.7 million over the previous year.

The steel ministry fears that exports will shoot up further once the global economy is back on growth track, said the official. Moreover, domestic consumption of the metal would surge as top steel makers such as SAIL and Tata are setting up huge steel capacities.

The steel ministry’s proposal is for imposing export duty across the board, for all categories of ore. At present only iron lumps attract 5% export duty while there is no duty on iron ore fines. At current price of about $ 70-80 per tonne, the steel ministry’s proposal would mean that mining companies would have to pay Rs 350-400 per tonne as export duty.

“India’s top iron ore producers export iron ore only after meeting the domestic requirement. Imposition of 10% duty on exports of iron ore in addition to levy of ad valorem royalty on the raw material will make exports incompetent in the international market,” said Federation of Indian Mineral Industries secretary general RK Sharma. India produces close to 200 million tonne of iron ore every year, of which 50% is exported. Around 80% of the country’s ore exports go to China, while the rest goes to Japan and Korea.

In the April-June quarter, iron ore exports stood around 26 million tonne, the same as the corresponding quarter of the previous year. But, iron ore exports slipped 45% to 5.6 million tonne in June over the previous month.

Source: Economic Times

ENRC Says Some Plants Running At 95 Per Cent

In the six-month period to June 30, pre-tax profits tumbled 63pc to $751m (£454m) on revenues 50pc lower at $1.7bn.

Commodity prices and demand for metals plunged over the last year as global trade was hit by the financial crisis.

Eurasian Natural Resources Corp (ENRC) is a major producer of ferrochrome, a constituent of stainless steel, and demand for the alloy from China was strong.

Johannes Sittard, the company’s chief executive, told The Daily Telegraph that he believed that strength in Chinese ferrochrome imports was not down to restocking, but reflected “actual consumption”.

The company halved its interim dividend to 6p from 12p, but this is in line with its dividend policy of paying out 15pc – 20pc of earnings. However, the 6p pay-out represents 15pc of earnings, so is at the lower end of the group’s targeted range. It will be paid on October 8.

The company continued to make good progress on reducing costs, which fell 31pc in the period. However, when the effects of the devaluation of the Kazakh tenge earlier this year are stripped out, costs fell 17pc. The company said that demand had improved and some of its plants were working close to full capacity. ENRC reached 95pc capacity utilisation in its ferrochrome division in Kazakhstan this month. For iron ore, utilisation now stands at 100pc.

The company has $2m in cash and outstanding debt of $585m, so its balance sheet remains strong.

Mr Sittard said he was aware that there would be opportunities to purchase assets at good valuations in the current environment, so targeted acquisitions are on the cards.

ENRC is 25pc-owned by Kazakh copper producer Kazakhmys, and there has been much speculation regarding a merger of the two groups.

However, Mr Sittard said that there were no plans for a combination and both management teams were working well together.

Source: Daily Telegraph

Friday, August 21, 2009

Iron Ore Spot Price Falls On Steel Decline

The cash price for Australian iron ore delivered to China, the world’s biggest buyer, slumped 9.3 percent after Chinese steel prices declined.

The price for 62 percent grade ore fell $9.70 to $95 a metric ton yesterday, according to The Steel Index. It rose to $105.90 on Aug. 13, the highest this year. Prices for hot-rolled coil steel in China fell 2.1 percent yesterday and have declined 13 percent since Aug. 7.

The drop came as output rose in China and steel prices slumped, Tom Albanese, chief executive officer of Rio Tinto Group, the world’s second-biggest ore exporter, said yesterday. The Steel Index price has risen 32 percent this year as China’s 4 trillion-yuan ($585 billion) stimulus plan spurred demand.

“The steel market is overheated,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. The ore price may “move back towards $90 a ton near term,” he said.

The Baltic Dry Index, a measure of commodity-shipping costs, fell for a third straight day yesterday. Ore prices have likely “topped out” this year amid the declining steel prices, Liberum Capital analysts said this week.

Iron ore swaps for settlement this month traded at $99.25 a ton yesterday, according to SGX AsiaClear over-the-counter prices from Singapore Exchange Ltd. They indicate prices may drop to $90.08 by December.

Rio Tinto, BHP Billiton Ltd. and Fortescue Metals Group Ltd. are the three-largest iron ore exporters from Australia.

The ore price may re-test its highs later this year, ANZ’s Pervan said.

Source: Bloomberg

Kuzbassrazrezugol Sales Volumes Down 50% In 2009

Russian coal mining company Kuzbassrazrezugol, a subsidiary of the Russian Ural Mining and Metallurgical Company has issued its operational results for July and for the first seven months of 2009.

By July 2009 Kuzbassrazrezugol had fulfilled its production plan for the month by 101% producing 4.07 million of coal, including 245,900 tonnes of coking coal. Meanwhile, since the beginning of the current year, Kuzbassrazrezugol’s coal output amounted to 25.896 million tonnes down by 9%YoY including 1.354 million tonnes of coking coal down by 57 %YoY.

In January to July 2009, Kuzbassrazrezugol’s deliveries of coking coal amounted to 1.568 million tonnes down by 50.4%YoY compared to the same period last year.

In 2009, Kuzbassrazrezugol plans to produce a total of 46 million tonnes of coal, including 1.998 million tonnes of coking coal.

Source: Steel Guru

Thursday, August 20, 2009

Coal India To Import Coal From December

State-run Coal India Ltd (CIL) would start import of non-coking coal from December to meet the requirement of power generating firms.


It is the first time that the public sector undertaking (PSU) would import coal on its own. CIL aims to import four million tonnes (mt) this financial year, which is the target given to it by the Planning Commission.

“However, we are yet to finalise the countries from which we would source non-coking coal, as it would depend on the requirement specifications of our consumers,” a CIL source told Business Standard.

CIL is in the process of setting up an in-house import cell to work out the modalities for import. The four mt to be imported would be equivalent to six mt of domestic coal, as the calorific value of imported coal is 50 per cent higher.

Owing to the growing demand for coal in the domestic market, especially from power producers, the Centre had revised the coal import target from 25 mt to 35 mt in 2009-10.

In 2008-09, the country imported about 18 mt, as against a target of 20 mt. National Thermal Power Corporation (NTPC), the country’s largest power producer, which planned to add around 3,000 Mw of power in this year, is planning to import 12.5 mt of coal, as compared with 8.2 mt which it imported in 2008-09.

CIL would provide 312 mt of coal to power utilities in this financial year, compared with 292 mt which the navratna coal PSU provided in 2008-09.

Source: Business Standard

Orissa Titanium Plant To Resume Production In Next Two Years

The Rs 2000-crore integrated titanium plant proposed to be set up near Chhatrapur in south Orissa's Ganjam district is expected to resume production in the next two years.

The plant is being set up by the Titanium Products Private Limited (TPPL), a joint venture (JV) company between Kolkata-based Saraf Agencies and the Russian government.

Earlier, the company had announced to start construction work in October 2010.

“The work on the titanium plant was delayed because of the elections”, said SL Modi, general manager, TPPL.

The construction of the plant would commence within a couple of months, he added.

The JV company had announced an investment of Rs 2,000 crore on the plant in two phases. The estimates also include the cost of establishing a Special Economic Zone (SEZ). While Rs 1,150 crore would be invested in the first phase, the second phase would cost another Rs 850 crore. The plant aimed to produce 1,08,000 tonnes of titanium slag, 68,000 tonnes of high purity pig iron, 40,000 tonnes of dioxide pigment and 10,000 tonnes of titanium sponge per annum. The company has already acquired around 300 acres of land as against the requirement of around 600 acres for the plant and the proposed SEZ.

While the integrated titanium project will be set up in 250 acres, around 350 acres were needed for the proposed SEZ. The land acquisition process is underway, said Modi.

“The company has got all the necessary clearances for the project including the environment clearance from the Union ministry of environment and forest (MoEF). The Centre has also approved the proposed SEZ project of the company”, he claimed.

TTPL has already invested around Rs 125 crore on the project.

The company will procure the raw material Ilmenite from the Orissa Sands Complex (OSCOM), a unit of Indian Rare Earths Limited (IREL), located near the proposed site of the integrated titanium project.

Source: Business Standard

Rio Halts Spot Iron Ore Sales

Rio Tinto Ltd/Plc is selling most of its iron ore at fixed or provisional benchmark prices, halting most of the spot market sales that made up half its first-half output, even as Chinese mills hold out for cheaper annual rates.

The comments by CEO Tom Albanese lend support to talk that many Chinese mills have tacitly agreed to the 33 percent price reduction set in May by Japanese buyers, although the Chinese industry as a whole has not formally accepted the benchmark.

'Right out now we are primarily selling at provisional pricing, reflecting the existing benchmark settlement we've had with Japanese and other producers and will continue to do so until circumstances change,' Albanese told reporters after the world's No. 2 mining house reported a 54 percent slump in first half underlying earnings.

Rio Tinto and other miners diverted millions of tonnes into the spot market earlier this year as mills outside China abruptly cut production due to the recession.

But demand from China soared as mills ran near flat out thanks to Beijing's stimulus package, while speculators also built up iron ore and steel inventories, helping lift spot prices above $100 per tonne for standard 63.5 percent iron ore -- far beyond the roughly $63 a tonne benchmark set in May.

As spot prices surged, demands by the Chinese Iron and Steel Association umbrella group for a discount of as much as 45 percent this year appeared increasingly untenable.

Source: Reuters

Manganese Ore Price At USD7-8 Per MTU

TEX has reported that the spot price of medium grade manganese ore to be shipped to China has suddenly risen steeply and the current price has reached a level of USD 7 to USD 8 per Mn 1% CIF. It seems certain that the price of manganese ore to be offered by major manganese mines to regular consumers for shipments in October to December will rise by a considerable extent. As a reference, the price of medium grade manganese ore settled with Chinese customers for shipments in July to September quarter is USD 3.50 per Mn 1% CIF.

Some of major manganese mines in South Africa have already sold all their cargoes to be shipped in the October to December quarter. Also, major manganese mines in Australia have already sold out manganese ore for shipments in the July to September quarter. A reduction in the production of manganese ore that began in the October to December quarter of 2008 by major manganese mines has had a substantial effect on the market together with rapidly improved demand and this change of the market position has now come to the surface.

World production of manganese ore decreased by 26% in October to December 2008 and by 54% in the January to March quarter of 2009 in comparison with production reached at its peak. An improvement in the supply and demand of manganese ore has meant a steep rise in price for manganese ore to be imported into China and the spot price of medium grade manganese ore for China during at end of July to the first week of August jumped to a level of USD 7 to USD 8 per Mn 1% CIF, which is compared with USD 5.00 to USD 5.50 per Mn 1% CIF China prevailed in July.

The world output of crude steel in the first half of 2009 was 549 million tons, having decreased by 21% compared with that in the same period of 2008, but the world output of manganese ore in the first half of 2009 had decreased much more than that of crude steel.

Source: Steel Guru

Wednesday, August 19, 2009

Regency Mines Signs PNG Cobalt Agreement

Regency Mines Plc a mining exploration and mineral investment company, said on Wednesday it signed a memorandum of understanding (MoU) related to its stake in a nickel-cobalt project in Papua New Guinea.

Under the MoU, Regency agreed to pool its interest in the Mambare project with the privately-owned Direct Nickel's (DNi) lateritic nickel/cobalt treatment technology in a new company, in which both parties would have shares.

The new company would raise funding for the further development of Mambare, including a pilot plant, Regency said.

DNi would assume the role as project operator, and both parties would be represented on the board and in the management of the new company, it said.

Source: Reuters

Losses Up At New World Resources

Mining group New World Resources swung to a bigger than expected loss
in the second quarter of 2009 and halted its first-half dividend
payment to keep cash as it pulls out of the worst of the
economic crisis. NWR, owner of the Czech Republic's largest hard coal mines,
showed a 39.3 million euro loss in April to June due to falling
sales and production after making a 71.3 million euros net
profit in the same period last year. Analysts had on average expected a loss of 18.3 million
euros. Shares in NWR fell more than 6 percent at the open and were
trading down 4.5 percent at 138.8 crowns by 0723 GMT. "Overall the numbers came out at the bottom range of the
consensus," said Bram Buring, an analyst with Wood & Co. "The
negative surprise is stemming primarily from depressed coke
prices in Q2." Revenue at the Prague, London and Warsaw-listed firm fell to
243.9 million euros from 463.1 million a year ago, missing a
forecast of 268 million. The results included discontinued operations, the company
said. "Market conditions were difficult for NWR throughout the
first half of this year. The steep decline in central European
steel production led to a contraction in demand for our coking
coal and coke," Mike Salamon, NWR's chairman, said. Coal production in the first half of the year fell 17
percent and coke production slumped 40 percent year-on-year. The economic downturn in central Europe has battered NWR's
steel customers, although Salamon said there were signs steel
production levels are rising. "Our inventories peaked in April and are coming down since
then. We expect a better second half than the first half," he
said, adding the group may be able to surpass its 10.5 million
tonnes coal production target for 2009, which it had cut in May. The mining group also said it had suspended dividend
payments to keep balance sheet flexibility. It had 392 million
euros in unrestricted cash in the first half.

Source: Reuters

Tuesday, August 18, 2009

Cash Prices For China Iron Ore "May Have Peaked"

Cash prices for iron ore delivered to China, the world’s biggest buyer, may have peaked this year amid declining steel prices, Liberum Capital said.

The price for ore from Australia is trading at $105 a metric ton after dropping last week from a high this year of $105.90, according to The Steel Index.

Benchmark steel prices in China last week had their first decline in six weeks, while a measure of commodity shipping costs on the Baltic Dry Index slumped 17 percent this month on speculation the nation’s demand for iron ore may be slowing. The Steel Index price has risen 46 percent this year as the Chinese government’s stimulus plan spurred demand.

“The vertiginous rise in the spot iron ore price into China seems finally to have paused last week with prices topping out,” Liberum analysts said yesterday in an e-mailed note. “We feel we have now seen the highs for the year,” they said, citing the decline in steel and cargo prices.

Iron ore swaps for settlement this month traded at $100.60 a ton yesterday, according to SGX AsiaClear over-the-counter prices from Singapore Exchange Ltd. They indicate prices may drop to $96.08 by December.

Ore from India dropped last week for the first time in four months, declining 0.5 percent to $110.50 a ton, according to Metal Bulletin.

The world’s three biggest suppliers BHP Billiton Ltd, Rio Tinto Group and Vale SA, control two-thirds of the world’s seaborne trade.

Source: Bloomberg

China Seeks To Break New Ground With Fortescue Deal

China, planning to bankroll a $6 billion iron ore expansion of Fortescue Metals Group Ltd. in Australia, is poised to make further investments to help break the “stranglehold” of the world’s three-largest exporters.

“The Chinese steel mills are trying to dilute the concentration of iron ore supply,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. “They will be looking for more deals like this.”

China, the world’s biggest buyer of the ore, has invested in $56 billion of projects globally to try to reduce dependence on Vale SA, Rio Tinto Group and BHP Billiton Ltd., which control two-thirds of seaborne supply. The nation yesterday scaled back contract price demands together with the Fortescue deal after seven months of stalled talks.

The Chinese “are very keen to see supply away from BHP, Rio and Vale grow,” said Tim Schroeders, who helps manage A$1.1 billion ($904 million) in stocks at Pengana Capital Ltd. in Melbourne, including the three biggest producers. They would want to “lessen the stranglehold, or perceived stranglehold, that the big three have,” he said.

Fortescue, Australia’s third-largest iron ore exporter, fell 3.9 percent to A$4.40 at the 4:10 p.m. Sydney time close on the Australian stock exchange, giving it a market value of A$13.6 billion. The stock has more than doubled this year as a rebound in demand in China boosted ore cash prices by about 46 percent.

Chinese lenders will arrange between $5.5 billion to $6 billion of financing for Fortescue, in which China’s Hunan Valin Iron & Steel Group has a stake, as part of a sales price accord, the Perth-based company said yesterday. Most of the money will be used to expand production, Fortescue Chief Executive Officer Andrew Forrest said yesterday on a conference call.

“Fortescue and China are hoping the miner has the potential to break the duopoly of BHP and Rio” for Australian iron ore, said Zhou Xizeng, a Beijing-based analyst with Citic Securities Co. BHP and Rio are the two biggest producers in Australia, itself the biggest exporter of the ore.

Fortescue, which had delayed expanding its iron mine amid a cash squeeze and a slump in demand, plans to increase capacity to 95 million metric tons by 2012, Chief Financial Officer Michael Minosora said last week, from current capacity of about 45 million tons. It had cash of $654 million and debt of $2.8 billion at June 30, according to company filings.

“The Chinese aren’t there for next year, they’re not there for the year after, they’re there for the next 10 to 20 years,” said James Wilson, a resources analyst at DJ Carmichael & Co. in Perth. “Fortescue has its own infrastructure, its own port facilities, it’s ramping up production. There’s a great case for investment there.”

China bought record volumes of ore in July as the government’s 4 trillion yuan ($585 billion) stimulus package spurs demand for steel in construction, automobiles and washing machines. China may spend more than $500 billion on foreign resource investments over the next eight years, according to Deloitte Touche Tohmatsu.

China’s drive to secure ore production was set back in June when Rio, the world’s second-largest exporter, rejected a planned $19.5 billion investment by Aluminum Corp. of China, or Chinalco, that would’ve included stakes in Rio’s Australian iron ore operations. The deal was scrapped in favor of an iron ore venture with rival BHP, a venture which “hints heavily of monopoly,” the China Iron & Steel Association has said.


“The BHP-Rio joint venture is China Inc.’s worst nightmare,” Charlie Aitken, Southern Cross Equities Ltd. executive director, said today in a note. “China Inc. has attempted to make Rio appear a ‘dishonorable company’ ever since Rio left Chinalco at the altar and ran into BHP’s arms.”

Hunan Valin Iron & Steel, Fortescue’s second-largest shareholder with a 17.3 percent stake, said in May it would help Fortescue produce 100 million tons of iron ore a year. It started output from its A$2.8 billion mine in May last year. Chinese financing of as much as $6 billion could fund an expansion to 155 million tons a year and potentially pay some debt, Southern Cross said in a report yesterday.

“Fortescue’s cash flow would be squeezed unless it paid down existing debt or it quickly and significantly increased sales volumes,” Morgan Stanley said today in a note.

Rio’s share of ore output in the 12 months to June 30, 2009, was 151 million tons, while BHP reported output of 114.4 million tons in the 12 months ended June 30. BHP has approved spending of $4.8 billion to increase capacity to 205 million tons a year from 2011 and is studying a further lift to 350 million tons a year. Rio is studying an expansion to 320 million tons.

“China’s strategic aim to encourage as much as iron ore production as possible has the ability to undermine the historical high returns that iron ore has generated,” Citigroup Inc.’s Clarke Wilkins said yesterday in a report.

Source: Bloomberg

Evraz Sells Stake In Cape Lambert Iron Ore Project

Evraz Group SA, Russia’s second-largest steelmaker, sold its stake in the Cape Lambert Iron Ore project in Western Australia.

Moscow-based Evraz, whose controlling shareholders include Russian billionaire Roman Abramovich, sold 60 million shares in Cape Lambert Iron Ore Ltd., the Australian company said in a statement today released by the local stock exchange. The shares were bought by U.K. and Australian investors.

Evraz spokesman Sergei Lavrinenko confirmed the company exited the project in a phone interview today. Vice President Pavel Tatyanin said on an April 28 conference call that the company would sell its stake, Lavrinenko added.

SourcE: Reuters

Monday, August 17, 2009

Posco To Raise CR Flat Export Price

POSCO has announced to raise its export price for stainless steel cold rolled flat by about USD 150 to USD 200 per tonne in response to high nickel costs and strong demands.

Meanwhile, it reported that its stainless steel exports during the second quarter increased to 308,000 tonnes by 27.8% QoQ as compared with the first quarter.

It also predicted that stainless steel price will remain high because of high nickel price and tight supply in ferrochrome.

Source: Steel Guru

Turkey Chrome Exports Up 40%

According to Turkish government statistics, Turkey exported 276,647 tonnes of chrome ore in July 2009, up by 40% YoY as compared with July 2008.

Russia, which imported 5,050 tonnes of chrome ore in July and 63,003 tonnes during January to July 2009 period, became the second biggest Turkish chrome ore importer.

In addition, Turkey exported 13,066 tonnes of ferrochrome in July, with 12,852 tonnes having been shipped to China.

During January to July 2009 period, 55,472 tonnes of ferrochrome were exported, up by 67% YoY as compared to the same period of 2008.

Source: Steel Guru