The Pascometer seeks out a cheap headline today with some late-to-the-party megabearishness on iron ore:
The more bearish iron ore analysts have another voice in their chorus warning about price falls – the China Iron and Steel Association. If they’re right, there are ramifications for the federal budget, as well as the viability of some smaller miners.
The leaders of China’s iron ore and steel industries gathered last week for the Qingdao iron ore seminar and spoke openly and “excitedly” about an impending iron ore glut – good for steel mills, bad for iron ore miners, both here and in China.
Standard Bank bulk commodities analyst Melinda Moore attended as both a speaker and a delegate. She’s reported that CISA believes the peak for iron ore prices has already passed this year, with as much as an extra 200 million tonnes annual capacity to be completed by the big four suppliers in the second half of this year.
Meanwhile, at the other end of the spectrum, Vale reckons:
BRAZILIAN mining giant Vale, the world’s largest producer of iron ore, expects new production capacity in Australia during the second half of this year to weigh on prices for the key steelmaking component.
But the company still doesn’t see benchmark iron-ore prices falling below $US110 per metric tonne “in a sustainable way”, said Jose Carlos Martins, Vale’s head of ferrous and strategy, in a conference call.
“We’re estimating between 30 million and 40 million tons will be added during the second half of the year,” Mr Martins said, with the additional capacity coming mainly from Australia. “That should certainly cause some pressure on prices until demand catches up to absorb the capacity.”
So, what is it? 40 million tonnes or 200 million tonnes? Bit of a difference.
RIO is adding 53 million tonnes this year but some of that is online already so let’s say 40 million tonnes in the second half. FMG is adding 40 million tonnes at Kings. BHP is adding 20 million tonnes or so and then there’s a few bits and pieces for another 10 million tonnes. So, Australia alone is adding 100 million tonnes plus in the second half.
Then there is Vale and other Brazilian mines adding around another 30 million tonnes going into next year and the return of Karnataka ore around the same or a bit less.
So, it’s about 160 million tonnes in the next year or so, about a 14% increase, most in the next six months.
That’s all!
