Traders and exporters feel the prices may come down by $10 to $150 per tonne by the end of this month

The Multi Commodity Exchange of India (MCX) has received permission from the commodity markets regulator, the Forward Markets Commission, to launch an iron ore futures contract in Mumbai.

India`s metal and energy exchange MCX has already commenced trading in iron ore futures. This is the country's first commodity exchange to launch the contract. MCX's iron ore contract is designed to be the true benchmark of the Indian iron ore fines export market.

Iron ore is one of the most important commodities in the world today with increased demand being witnessed from steel mills.

``The MCX iron ore futures contract will give all market participants an opportunity to hedge their price risks against the volatility of the physical market,'' MCX's managing director Lamon Rutten said.

India is the world's third-largest iron ore supplier and plays a significant role in the global iron ore industry.

India had an estimated annual production of around 226 million tonnes in 2009-10, according to data from the ministry of mines, government of India. It exports over 130 million tonnes of which a large portion account for exports of ore fines.

``MCX's iron ore futures contract will go a long way in creating a market-driven benchmark for the entire industry and also for those nations importing iron ore from India, mainly China, which is the world's largest importer,'' the official added.

Meanwhile, an official of Sesa Goa said that iron ore prices dropped by 10% between February and March. ``The percentage drop from mid February to mid March is between 10-15%, depending on the grades, where lower grades have got a bigger hit than the higher grades,'' said P K Mukherjee, managing director of Sesa Goa.

He added that demand had been robust for the past two-three years, especially from China, whose field demand is quite aggressive and strong.

However, iron ore prices in China have come down over the last few days following a slow down in demand due to the devastating earthquake in Japan, the world's second largest steel maker after China.

Meanwhile, India's union government increased export duty on iron ore fines four-fold to 20% in the budget proposal for 2011-12, in a bid to discourage exports and conserve the material for use by the steel makers within the country.

Iron ore spot prices in Orissa, a leading producer of the ore in the country, has slumped and may fall by at least 6% within the next two weeks because of the new export duty that comes into effect from April 1.

Currently better quality iron ore is priced at $160 per tonne at Paradeep port. Traders and exporters feel the prices may come down by $10 to $150 per tonne by the end of this month. After the announcement in the budget, iron ore shipment contracts have taken a hit, exporters said.

Source

Read More..

Top global miner BHP Billiton’s (BHP.AX)(BLT.L) chief executive sees iron ore prices staying strong for as long as two years, and is confident the company’s profit margins will remain robust, even as costs escalate.

Marius Kloppers was bullish on the near-term outlook for iron ore prices due to supply constraints, with India not exporting and rivals having held back investment in new capacity during the global financial crisis.

“But what I can say is there are certain products in our portfolio, particularly in iron ore…which looks very, very good over the next three, six and nine months,” Kloppers said on Australian television in an interview recorded after the company reported a record first-half profit of $10.7 billion.

“Simply put, over the next 12, 18 months, perhaps two years, there’s not a substantial amount of new capacity coming on, and it’s more an issue of the supply side rather than the demand side,” he said.

His counterpart at rival Rio Tinto (RIO.AX)(RIO.L) was more specific a week ago, forecasting that tight supplies would keep iron ore prices high in the near term, but prices would fall below $100 a metric ton from current record highs around $190 a metric ton when mine expansions are completed in 2014 and 2015.

BHP announced this week it would spend $80 billion on mine developments and expansions over the next five years, and Kloppers said based on expected returns on those projects, it should be able to post compound growth of 5-6 percent a year for “many many years.”

“For us it’s a question of where cost structures go, but I feel very comfortable that we’re going to have healthy margins going forward,” Kloppers said on Australian Broadcasting Corp’s Inside Business show, aired on Sunday.

BHP had a 44 percent profit margin in the first half of this financial year.

Kloppers played down talk that the company had put acquisitions on the backburner in favor of investing in its own projects, saying while takeover targets were expensive now based on lofty commodity prices, that may not last long.

Asked if mergers and acquisitions were off the agenda, he said: “No. Cycles change.”

“In six months’ time or a year’s time, something else may come up, the situation may change.”

After being forced to kill three mega-deals since 2008 due mainly to regulatory and political obstacles, Kloppers said the company would clearly run into problems if it chased an iron ore acquisition, like its abandoned bid for no.2 iron ore miner Rio Tinto.

But he saw no such obstacles for deals in products where BHP was less dominant, including potash, copper, and oil and gas, as industry experts have speculated.

“And obviously, the oil and gas market is a very large one where there may be opportunities going forward,” he said.

Speculation has focused on BHP chasing Anadarko Petroleum (APC.N) for its assets in the Gulf of Mexico.

Kloppers deflected questions about diplomatic cables released by WikiLeaks, which showed he had offered to trade intelligence on China with Washington, as he was concerned about Chinese spying on BHP.

“I certainly don’t remember offering anything,” he said.

Did he have any secrets to offer? “Not that I know of,” he said.

Source

Read More..

Magnitogorsk Iron & Steel Works (MAGN.MM), Russia's third-largest steelmaker, said on Friday its core plant in the Urals will produce 12.0 million tonnes of steel products next year.

The company also said in a presentation that its new MMK-Atakas Turkish joint venture will produce 1.3 million tonnes of steel products.

This year's steel products output is seen at 10.2-10.3 million tonnes.

The presentation also said that MMK sees averaged realised price growth potential of at least 15 percent next year.

source

Read More..

Despite being outbid by the world's largest steel company in its quest to acquire Vancouver's Baffinland Iron Ore Mines, private equity firm Energy & Minerals Group has yet to thrown in the towel, hinting Monday the fund is prepared to make a revised offer.

Nunavut Iron Ore Acquisition-the special subsidiary created by the fund specifically for the Baffinland bid-has extended its offer to purchase Baffinland at a price of Cdn 80-cents per share until 7 p.m. on December 2, 2010.

Last Friday the Ontario Securities Commission halted trading in any securities issued or to be issued under the Baffinland shareholder rights plan adopted in March 24, 2009. Nunavut Iron Ore had argued the rights plan blocked the right of Baffinland shareholders to decide for themselves whether to accept the Nunavut all-cash offer of C$247 million or ArcelorMittal's C$433 million all-cash bid.

Baffinland's largest shareholder, Resource Capital Funds, has already entered into a lock-up agreement with ArcelorMittal in which the fund will tender its 23% of Baffinland shares to the offer.

In a news release Monday, Nunavut Chairman Bruce Walter said "Nunavut Iron is gratified that the Commission agreed with our submissions and cease traded Baffinland's shareholders' rights plan. As a result, the rights plan will not stand as an impediment should we proceed with a revised offer to Baffinland's shareholders."

"Nunavut Iron is considering ArcelorMittal S.A.'s offer for Baffinland and the options available to Nunavut Iron with respect to its own offer," the company said.

The object of both companies' desires is the Mary River Property, which is believed to have a 20-year mine life and an average annual iron ore production of 18 million tonnes. The Nunavut-based property has 365 million tonnes of proven and probable reserves grading 64.7% iron and 52 million tonnes of measured and indicated resources grading 64.6% iron.

Baffinland said it has invested more than C$400 million in the property, located on Baffin Island.

source

Read More..

Gross profit at China's large-scale steel companies exceeded 7 billion yuan ($1.05 billion) in October, up 21 percent from the previous month, according to data issued by the China Iron and Steel Association (CISA) on Tuesday.

The 77 member companies monitored by CISA saw steady improvement in profitability over the year, earning 64 billion yuan over the first three quarters, almost double the same period last year, the association said.

However, profit margins stood at just 2.84 percent over the first nine months, and the domestic steel industry remains at the mercy of small fluctuations in product or raw materials prices.

Demand for steel traditionally weakens in the winter months, but many in the industry are hoping that widespread capacity closures brought about by a nationwide energy efficiency drive will help shore up prices in November and December.

Prices reached their highest in 16 months earlier in November in anticipation of a supply crunch, but have since retreated.

CISA said in its regular report last week that prices were likely to remain volatile until the end of the year, with oversupply still a big problem in the industry.

Chinese steel companies have also been hit by rising iron ore prices following a decision by an Indian court to uphold a ban on exports from the country's key exporting region, Karnataka.

The Steel Index iron ore benchmark .IO62-CNI=SI rose $1.6 to $164.4 per tonne on Monday, its highest since May 17.

CISA said last week that rising ore costs could offer some support to steel product prices in the weeks to come.

source

Read More..

Vale plans to more than double production by 2015, prompting its board of directors to approve a US$24 billion capex budget for 2011, dedicated to sustaining existing operations, R&D, and project execution.

Next year's capex budget is a 125.1% increase over the US$10.66 billion invested in the last 12-month period ended on September 30, 2010.

Vale plans to bring 18 large projects on line between 2010 and 2012 at an estimated total price tag of US$26 billion. Approved projects include Carajás Additional 30 Mtpy, Conceiçao Itabritos, Vargem Grand Ibabiritos, Oman, Tubarão VIII, CLN 150, Salobo, Salobo II, Konkola North, Long Harbour, Totten, Moatize, Biofuels, Estreito and Karebbe.

Five projects are expected to be completed next year including nickel/copper project Totten, an old mine in Sudbury; copper project Salobo; coal project Moatiz; and power generation projects Estreito and Karebbe.

"While iron ore and nickel will remain as our largest operations, our investments will entail a significant expansion of fertilizers, copper and coal, thus fostering the consolidation of a diversified portfolio of world-class assets, composed of bulk materials, base metals and fertilizers," Vale said in a news release Thursday.

While planned iron ore production is 311 million metric tons for 2011, Vale has targeted 522 million metric tons of production by 2015. Nickel production will be increased from the 295,000 tonnes planned for 2011 to 381,000 tonnes by 2015.

Copper production will be increased from 332,000 tonnes anticipated next year to 691,000 tonnes in 2015. Coal production will rise substantially from 11.6 million tonnes in 2011 to 42 million tonnes in 2015.

Potash production will be more than quadrupled from 800,000 tonnes in 2011 to 3.4 million tonnes in 2015. Phosphate rock production will be nearly double from 6.4 million tonnes in 2011 to 12.7 million tonnes in 2015.

Vale plans to spend $15.3 billion or 63.8% of its capex budget in Brazil, along with $1.96 billion budgeted for Canada, $1.4 billion for Argentina, $1.13 billion for Guinea, $1.12 billion for Mozambique, $663 million for China, $436 million for Australia, $338 million for Indonesia, $306 million for Oman, $166 million for Malaysia, $163 million for Peru, $102 million for Columbia, $98 million for Liberia, and $93 million for Zambia among other countries.

Budgeted R&D expenditures in 2011 are US$681 million to finance global exploration, $236 million for natural gas exploration, $805 million for conceptual, pre-feasibility and feasibility studies, and $264 million to be invested in new processes, technological innovation and adaption. Mineral exploration programs are being implemented in 22 countries.

source

Read More..

Anglo-Australian mining giant Rio Tinto has agreed to a 13 percent cut in fourth quarter iron ore prices with Japan's Kobe Steel Ltd, probably setting a trend the industry will follow.
The deal, expected by the market, could fuel a restocking cycle if other players follow, leading to stronger prices for most of 2011, offsetting the savings of nearly $3 billion in the fourth quarter Chinese buyers might see as a result.
"We have agreed to a 13 percent cut in the price of iron ore for October-December from July-September," Gary Tsuchida, spokesman for Japan's fourth-largest steelmaker, said on Wednesday, although he would not comment on the actual price.
However, a spokesman from another Japanese steelmaker, Sumitomo Metal Industries, said the company had agreed with Rio Tinto on a price of around $127 a tonne, down 16 percent from around $147.00 a tonne paid for the third quarter.
Larger firms Nippon Steel and JFE Steel both declined to comment.
"The deal looks like an average of the June, July and August spot price, and in line with expectations," said Ben Westmore, economist at National Australia Bank.
"On the demand side there it looks like they have steadied. There have been persistent stories about destocking by Chinese mills, part of the broad cycle and nothing to be panicked about."
The destocking cycle would turn around in the fourth quarter, resulting in rising prices in the first nine months of next year and a net rise for 2010 of the order of 7 percent, he added.
Chinese steel production remained brisk in August, but could slow in September after several provinces ordered mills to limit production.
China produced 1.7 million tonnes of crude steel per day in August, data from the China Iron & Steel Association showed, higher than July's daily average of 1.66 million tonnes as a 15 percent rally in prices of products like rebar encouraged output.
CISA data also suggested crude steel production slowed in the last 11 days of August after output in several provinces was affected by reduced electricity supply. But few in the market expect those cutbacks to endure.
CISA fought a bitter rearguard action against the launch of of a more flexible pricing system, instead preferring annual prices, which critics described as a "free put" option for Chinese buyers.
At the height of the economic crisis, spot prices plunged below the annual contract and Chinese mills were quick to defer or default on those higher priced annual tonnages to buy cut price spot material -- a move that dealt a finishing blow to the decades-old system.
Shan Shanghua, the secretary general of CISA, was not available while another senior official, the deputy head, declined to comment on the Rio Tinto price news.
If other miners agree to the same price as Rio and Chinese imports continue at the pace seen in the year so far, China will see its iron ore bill cut by $2.9 billion for the last three months of the year against the third quarter.
Based on Japan's imports of 77.9 million tonnes of iron ore between January and July, the nation's mills could save $626 million in the final three months of the year.
Glyn Lawcock, head of Australian Resources, UBS Securities Australia told Reuters the industry's move to quarterly pricing appeared to be working well, with customers sticking to agreed prices.
Prices would have to fall considerably further to result in output cuts by miners, he added.
"When (iron ore) get down to around $110 a tonne -- if it falls that far -- that provides a bit of a floor because the domestic guys (in China) are starting to get close to a break-even cost position."
"But while we stay above $100 a tonne -- most people in the market use basis $60 a tonne long term -- so, above $100 they are still making a lot of cash."

source

Read More..