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iron ore news - online

Iron ore fell to the lowest since 2012 on concern that a probe into commodity financing at China’s Qingdao port may hurt demand for the raw material amid a global seaborne glut.

Ore with 62 percent iron content delivered to the port of Tianjin declined 0.7 percent to $90.90 a dry ton today, the lowest level since September 2012, according to The Steel Index Ltd. Prices lost 3.8 percent this week and retreated in eight of the past nine weeks.

Chinese and foreign banks are examining loans linked to metals at Qingdao amid concern that risks are more widespread in the country, where traders use commodities from copper to iron ore and rubber to get funding. Iron ore slumped 32 percent this year as mining companies from BHP Billiton Ltd. (BHP) to Rio Tinto Group (RIO) expanded output, deepening a global surplus as growth slowed in China, the world’s largest buyer.

“Banks are more vigilant about iron ore financing,” Marcus Garvey, a London-based commodity analyst at Credit Suisse Group AG, said by e-mail. “Credit is clearly tight for a lot of people in the sector.”

Banks including Standard Chartered Plc, Citigroup Inc. and Standard Bank Group are reviewing potential fallout from Qingdao, where officials are checking whether metal stockpiles fell short of collateral obligations.

Multiple Loans

Investigators are trying to determine if single batches of copper and aluminum were used to secure multiple loans, bankers assisting with the probe told Bloomberg News this week. This will spur foreign banks to lend less money against commodity inventories in China, Goldman Sachs Group Inc. said June 9.

“If the probe spills over to iron ore inventory, traders will have problems getting financing,” Wu Zhili, a steel analyst at Shenhua Futures Co. in Shenzhen, said by phone. “They might start to dump ore, resulting in a market selloff.”

China’s iron ore inventory at ports fell 0.3 percent to 106.5 million tons in the week to June 6 from a record 106.86 million tons a week earlier, data from Beijing Antaike Information Development Co. shows. As much as 40 percent of inventory at ports may be tied up in financing, according to Daiwa Securities Group Inc.

Morgan Stanley reduced its price estimate for this year to $105 from $118 forecast in May as the seaborne surplus grew faster than expected and cost support at Chinese miners fell, analysts Joel Crane and Rachel Zhang wrote in a report yesterday. That’s lower than Goldman Sachs, which predicts an average of $109, and below UBS AG’s estimate of $111.

“We are now well into a process of price adjustment,” said Ric Spooner, chief market analyst at CMC Markets in Sydney, forecasting an average of $100 this year. “The supply surplus appears to be biting much faster than many assumed now that it’s finally emerged.”

Futures on the Singapore Exchange traded below $90 for the first time since the contract started in April last year. The contract for July settlement lost as much as 1 percent at $89.70 today.

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.netThomas Kutty Abraham

china mining iron ore

The Australian share market has closed slightly lower as a weaker resources sector and low consumer confidence weighed on sentiment.

Lonsec senior client adviser Michael Heffernan said uninspiring leads from overseas markets, lower iron ore prices affecting mining stocks, and two surveys showing flat consumer confidence had contributed to the modest drop.

Two separate surveys show that consumer confidence remains in the doldrums, with households worrying about the impact of the May budget's spending cuts on their finances.

"Hence the market sort of did nothing today," Mr Heffernan said.

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He said investors initially reacted negatively to a profit downgrade by travel agency Flight Centre but then reversed direction after concluding that the downgrade was not so bad after all.

In the resources sector, global miner BHP Billiton fell 34 cents to $35.94, Rio Tinto was 24 cents lower at $59.40, and Fortescue Metals shed nine cents to $4.54.

West Australian iron ore miner Aquila Resources was 12 cents higher at $3.61 as Mineral Resources appeared to be positioning for a bidding war for Aquila.

Engineering firm Downer EDI plunged 59 cents, or 11.15 per cent, to $4.70 after BHP Billiton cancelled a $360 million mining services contract with Downer at a Queensland coal mine.

The major banks were mixed. National Australia Bank scraped off one cent to $33.63, Commonwealth Bank backtracked 22 cents to $82.20, Westpac gained 12 cents to $34.75, and ANZ added 14 cents to $33.90.

In the retail sector, travel agency Flight Centre was 53 cents higher at $46.43 despite cutting it profit forecast.

KEY FACTS

* On Wednesday, the benchmark S&P/ASX200 index was down 15.7 points, or 0.29 per cent, at 5,454.0 points.

* The broader All Ordinaries index was down 16 points, or 0.29 per cent, at 5,432.5 points.

* The June share price index futures contract was 18 points lower at 5,459 points, with 20,469 contracts traded.

* National turnover was 1.24 billion securities worth $3.17 billion.

* The price of gold in Sydney at 1700 AEST was $US1,262.70 per fine ounce, up $US7.40 on Tuesday's price of $US1,254.80.

iron ore price

Iron ore price sinks below $US100
DOW JONES NEWSWIRES MAY 20, 2014 5:15AM

Iron ore prices have drifted below $US100 per metric tonne for the first time in nearly two years, driven down by market worries that demand from China is being outpaced by increasing output of the steelmaking raw material from international miners.

Australian exporters of iron ore -- the cheapest in the world -- still have headroom for exports at current prices, but analysts say some may be need to rethink planned expansions if the price continues to slide.

The Steel Index's benchmark price for ore with 62 per cent iron content at China's Tianjin port was $98.50 a tonne, down 2.2 per cent on Friday's level, with the record high of above $190 a tonne reached in early 2011 a distant memory.

"It certainly creates a big headwind for the iron ore mining companies," said Jeff Largey, London-based head of metals and mining at Macquarie Research. "In the near term, they will remain under pressure."

Australian mining companies like BHP Billiton, Rio Tinto and Fortescue Metals Group have poured billions of dollars into new mining or existing operations over the past few years as the value of industrial commodities soared to record levels in response to robust demand from China. The country is the world's largest buyer of iron ore, accounting for more than 60 per cent of seaborne trade.

Rio Tinto already has committed to boosting annual iron ore output in Australia by more than 20 per cent over the next four years in a bet Chinese demand will stay strong. Fortescue Metals and BHP are also building their production. Last week, Rio Tinto said its iron ore mining operations in the Pilbara reached a production rate of 290 million metric tonnes a year, two months ahead of schedule.

Fortescue Metals recently hit its target of producing 155 million tonnes of iron ore on an annual basis, and thinks it could boost exports by a further 13 per cent by mining more efficiently.

Shares in BHP were down 1.7 per cent, Fortescue fell 4.6 per cent and Rio Tinto lost 2.8 per cent at the end of trading on Monday.

"If prices dipped below $80 per tonne, we would see some marginal supply cutbacks, but the bulk of Australian iron ore production is still profitable, down to $50 per tonne," said Mark Pervan, an Australia-based analyst with ANZ Research.

"That said, an iron ore price below $80 per tonne, would halt or delay most expansion plans creating possible export supply tightness in two [to] three years' time," he said, adding that he expected prices will bounce back by $10-$15 a tonne in the months ahead.

Citigroup has said a continuing recovery in China's steel production as well a slower rate of supply growth in the second half could hold iron ore around $108 in 2014, although in the long term it remains bearish, forecasting a price of $80 a tonne in 2016.

Instead of bigger and cheaper producers of iron ore in Australia, the heat more immediately is likely to be on Chinese ore producers, who may have to cut back on their own output at ore prices between $90-$100 per metric tonne, said Paul Bloxham, HSBC's chief economist in Australia and New Zealand.

If such cutbacks kicked in, it would support prices because of lower supplies, he said.

However, reductions by Chinese producers could easily be offset by higher supplies from India, which was the third-largest supplier after Australia and Brazil until two years ago, when legal rulings closed mines and slashed exports.

India's Supreme Court recently eased a mining ban in two of the biggest producing provinces -- Goa and Karnataka, although the outlook for increased exports have been clouded by a separate order issued Friday to shut 26 mines in Orissa state, another leading producer.

Industry officials see these measures as temporary hurdles as they expect India's new industry-friendly government will try to remove obstacles to iron ore production and exports, although it is an open question how quickly this will happen.

"We do see Indian iron ore exports picking up, but they may not reach the level as three years ago," said Mr Largey of Macquarie Research.

iron ore price

April 30, 2014 118.58
March 31, 2014 111.83
Feb. 28, 2014 121.37
Jan. 31, 2014 128.12
Dec. 31, 2013 135.79
Nov. 30, 2013 136.32
Oct. 31, 2013 132.57
Sept. 30, 2013 134.19
Aug. 31, 2013 137.06
July 31, 2013 127.19
June 30, 2013 114.82
May 31, 2013 124.01
April 30, 2013 137.39
March 31, 2013 139.87
Feb. 28, 2013 154.64
Jan. 31, 2013 150.49
Dec. 31, 2012 128.51
Nov. 30, 2012 120.35
Oct. 31, 2012 113.95
Sept. 30, 2012 99.47
Aug. 31, 2012 107.50
July 31, 2012 127.94
June 30, 2012 134.66

iron ore news

Most purchases are private, with little data on the volumes affected, but traders at Asian trading firms say they are seeing a sharp rise in canceled contracts this year while other buyers are demanding heavy discounts.

The U.S. Department of Agriculture confirmed that China has canceled orders for 517,000 metric tons of soybeans, used to make cooking oil, and compares to imports of 63.4 million tons last year. South American soybean contracts have also been canceled because of weak demand, says trade journal Oil World.

The cancellations are a big worry for the commodity markets as exporters around the world had relied for years on China’s insatiable appetite for a wide range of raw ingredients. But now as jitters rise over the health of the economy, the fallout is rippling through into agricultural commodities, just weeks after the price of copper and iron ore tumbled on worries they had been used in risky Chinese financing deals.

…Natural rubber, mostly grown in Southeast Asia and used to make products ranging from tires to latex gloves, is also getting hit as some buyers from China refuse to honor existing agreements, or look for ways to negotiate discounts. Two large Asian rubber producers, who asked not to be named, said Chinese buyers had defaulted on them.

Traders say buyers are trying to ask for discounts, citing reasons such as cargo arriving a few days late and claims about poor quality or contamination, said Bundit Kerdvongbundit, vice president of Von Bundit Co., Thailand’s second-largest natural rubber producer. The contracts are already signed, but Chinese importers “refuse to take cargo or pay unless they get discounts.”

One comfort is that most companies trading with China have taken some sort of safeguards after widespread defaults in the wake of the 2008 global financial crisis, like asking for deposits, said Benson Lim, chief operating officer and head of global rubber trading at R1 International.

…However, “the business is so competitive that not all sellers are taking deposits, so they are hard-hit when buyers default,” he added.

Rubber prices have dropped more than 20% since the beginning of the year, due to worries over China’s slowing economy and a global surplus of the commodity. Many sellers who bought at high prices are unwilling to sell at a loss, pushing up stocks at the port of Qingdao to near-record levels recently. Stockpiles in some other commodities like soybeans and iron ore are also high as buyers hang on.

…”The number one problem is weak demand from the credit tightening last year and real estate which has a direct or pass through effect on all of this activity,” said Shanghai-based Citi Research commodities strategist Ivan Szpakowski.

iron ore