iron ore

* Chinese mills sell long-term iron ore contracts-trader
    * Spot iron ore rose for a 5th day on Monday
    * BHP eyes more job cuts at Australian iron ore unit

 (Updates prices)
    By Manolo Serapio Jr
    SINGAPORE, June 24 (Reuters) - Iron ore futures in China and
Singapore edged lower again on Tuesday, after recent gains,
pressured by plentiful supply forcing Chinese mills to unload
more cargoes into the market.
    An upbeat reading on China's manufacturing sector for June
helped boost spot iron ore prices on Monday, but traders say the
raw material may decline again as supply outstrips growth in
demand from the world's top importer.
    Chinese steel producers are selling iron ore cargoes
arriving in July under their long-term contracts with miners and
using the cash to buy cheaper iron ore sitting at China's ports,
said a trader in Shanghai.
    "We're doing this business now with mills who are trying to
sell their long-term cargoes that are index-based and are more
expensive than those at the ports," he said. 
    Australian 61-percent grade Pilbara iron ore fines are
currently trading at around 600 yuan a tonne at China's Shandong
port, or about $82-$83 excluding port charges and taxes, he
said. That compares to a price of $93 per tonne for a new
seaborne cargo of the same grade on Monday, he added. 
    The global iron ore supply surplus, which Goldman Sachs sees
hitting 72 million tonnes this year, has pushed Chinese mills to
cut back on long-term contracts in favour of cheaper spot
cargoes. 
    Iron ore for delivery in September on the Dalian Commodity
Exchange closed 1 percent lower at 683 yuan ($110) a
tonne. It touched a three-week high of 699 yuan on Monday.
    The August iron ore contract on the Singapore Exchange
 dropped 1.1 percent to $92.87 a tonne, with the July
and September contracts <0#SZZF:> also slipping. 
    The weaker futures could weigh on spot iron ore prices which
have rebounded since hitting a 21-month low last week.
    Benchmark 62-percent grade ore for immediate delivery to
China .IO62-CNI=SI climbed 1.4 percent to $93.40 a tonne on
Monday, according to data provider Steel Index. It marked a
fifth straight day of gains since the price struck $89 on June
16, the lowest since September 2012.
    
    BHP SEES MORE JOB CUTS
    Iron ore, the top business for global miners Vale 
Rio Tinto and BHP Billiton, has lost more than 30
percent of its value this year. 
    It has stayed below $100 a tonne for five weeks, far longer
than it did during the September 2012 slump, prompting even
low-cost producers such as BHP to look at trimming costs further
to stay competitive.
    BHP, the world's third-biggest iron ore miner, said it is
planning to cut more jobs at its Australian iron ore division as
it seeks to reduce costs.
    BHP employs about 16,000 people in its iron ore division and
earlier this year said that 170 jobs would go at its Whaleback
mine in the Pilbara iron ore belt. A further 100 people have
been let go at the division's Perth headquarters.
 
    Coping with rising supply and stiffer competition,
Australian rivals Rio and Fortescue Metals Group are
making deeper cuts in prices of low-grade iron ore cargoes to
China. 
    "It's quite tough on the ground. There's still too much
cargo available and mills don't want to chase prices because
they've got plenty of buying options," said another
Shanghai-based trader.
    Stocks of imported iron ore at 44 Chinese ports stood at
113.65 million tonnes as of June 20, exceeding the previous
record of 113.60 million tonnes reached in end-May, based on
data from industry consultancy Steelhome. SH-TOT-IRONINV
     
 Shanghai rebar futures and iron ore indexes at 0714 GMT
 Contract                          Last    Change   Pct Change
 SHFE REBAR OCT4                   3064     +0.00        +0.00
 DALIAN IRON ORE DCE DCIO SEP4      683     -7.00        -1.01
 SGX IRON ORE FUTURES JULY        93.38     -0.62        -0.66
 THE STEEL INDEX 62 PCT INDEX      93.4     +1.30        +1.41
 METAL BULLETIN INDEX             93.74     +1.61        +1.75
 Dalian iron ore and Shanghai rebar in yuan/tonne
 Index in dollars/tonne, show close for the previous trading day
 
($1 = 6.2090 Chinese Yuan Renminbi)    

 (Reporting by Manolo Serapio Jr.; Editing by Michael Perry and
Subhranshu Sahu)

iron ore news

Oversupply continues to weigh on the price of iron ore, which has slipped to a 21-month low following a record 1.2 million-tonne single-day shipment of the bulk metal out of Port Hedland last Saturday.

The benchmark iron ore price, measured out of the Tiajin port in China, has been trending down all week and slumped a further 2.1 per cent overnight on Thursday, to $US91.50 a tonne, the lowest level since September 2012.

Iron ore is down 3.2 per cent this week, and 31.8 per cent this year.

Last Saturday, Port Hedland shipped 1.27 million tonnes of iron ore in a single day, using seven capsize vessels, for the first time, to beat the previous, record set in April, by close to 160,000 tonnes.

The big miners are unfazed by the price crash, as they maintain low costs and higher quality grades of iron ore. BHP Billiton's breakeven sits at $US45 a tonne, while Rio Tinto's is $US43 a tonne. Vale's is a little higher at $US75 a tonne because it has to ship further from Brazil to China.

BHP, Rio, and Vale are all chasing record volumes of 217 million tonnes, 295 million tonnes and 360 million tonnes respectively.

"Right now, they wouldn't be thinking about managing their production into the market," UBS mining analyst Glyn Lawcock said. "We would estimate, BHP and Rio are still making in the order of $US35-$US40 per tonne margins."

In Australia, the value of iron ore exports has risen 24 per cent over the past year, even though the iron ore spot price has lost more than 30 per cent.

Single-metal miners such as Fortescue Metals and Atlas Iron face the difficult challenges of a higher cost base and lower quality iron ore, which is sold at a discount to the benchmark price. Fortescue has an all-in cash cost of around $US72 a tonne, while Atlas breaks even at about $US82 a tonne.

The grade and impurity discount between the benchmark 62 per cent iron ore Fe and grades sub-60 per cent has widened over 2014.

"Right now, we would understand if you're selling some spot tonnes of low quality product, you're taking the 6 per cent discount, plus potentially anywhere upwards of 15 per cent for impurity discounts," Mr Lawcock said.

The 15 per cent impurity discount has ballooned from as tight as 2 per cent in the December quarter last year.

"Fortescue is potentially now only making low double digit margins, $US10-$US12," Mr Lawcock said.

"Back three months ago, when discounts were narrower and prices were higher, those margins were probably close to $US30-$US40. It came in very quick, predicated by the fact that the discount went up and the price came down, so there was a double whammy."

As the Chinese government implements environmental policies curb inefficient and high-polluting steel producers, demand for lower grade iron ore wanes. The oversupplied market allows iron ore buyers the discretion to pass over product.

For every 1 per cent movement in the grade discount, Fortescue's pre-tax earnings fall by $100 million, according to Goldman Sachs.

Lower grade iron ore, 57 per cent to 58 per cent Fe, experienced a discount of $US10 a tonne over 2012 and 2013, but Credit Suisse estimates that was abnormally low. The discount is now $US19 a tonne and is expected to hit $US20 a tonne.

"The falling iron ore price has had the effect of reducing China's domestic production, as Australian producers hoped," Credit Suisse analyst Matthew Hope said.

"But also reduced demand for 56 per cent to 58 per cent Fe ore because the high-grade concentrate is needed for blending with lower grade ores to produce the right sinter quality."

Read more: http://www.smh.com.au/business/markets/iron-ore-hits-a-21month-low-20140613-3a0yd.html#ixzz34pOm4bbn

kuantan iron ore mining

Vale recently announced the sale of its entire stake in Vale Florestar Fundo de Investimento em Participações (FIP Vale Florestar) to Suzano Papel e Celulose (Suzano), for around $92 million. FIP Vale Florestar is a fund for investment in reforestation, which operates in the state of Pará, Brazil. Suzano is engaged in the production of eucalyptus pulp.

The sale of Vale’s stake in FIP Vale Florestar closely follows its announcement to idle its Integra Mine Complex in Australia, which produces metallurgical coal. Vale believes that operations are currently not economically feasible under the prevailing weak coal pricing environment. Technically, the Integra Mine Complex has been put under “care and maintenance,” a status that will allow the mine to be reopened quickly if market conditions improve. These events are a part of Vale’s strategy to optimize its portfolio as well as adopt discipline in capital allocation.

Following such a strategy is imperative, given the subdued iron ore pricing environment. The sale of iron ore and iron ore pellets accounted for around 73% of Vale’s net operating revenues in 2013. Thus, iron ore prices have a major impact on the prospects of Vale, the world’s largest iron ore producer.

iron ore

The global seaborne iron ore glut will probably be 21 percent bigger than forecast next year as steel production slows in China, the world’s largest consumer, according to Goldman Sachs Group Inc.

The surplus will reach 175 million metric tons in 2015, compared with a prior prediction of 145 million tons, Goldman Sachs said in a report dated yesterday. The bank estimates that output will exceed demand by 72 million tons and prices will average $109 a ton in 2014, before dropping to $80 next year.

Iron ore has slumped 27 percent this year as economic growth in China slowed and mining companies from BHP Billiton Ltd. to Rio Tinto Group in Australia boosted output, shifting the global seaborne market into a glut. Banks from Standard Chartered Plc to Credit Suisse Group AG say more Chinese steel mills will go bankrupt and hurt consumption.

“The market is no longer in balance but in the early stage of a structural surplus,” analysts including Christian Lelong wrote in the report. “China will not act as the safety valve in an oversupplied market for much longer.”

Ore with 62 percent iron content delivered to the Chinese port of Tianjin fell 1 percent to $97.50 a dry ton yesterday, the lowest level since September 2012, according to data from The Steel Index Ltd. The decline in iron ore, Australia’s biggest export earner, pulled the country’s dollar today to the weakest level since May 2.