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Tuesday, 10 February 15
IRON ORE MARKET TO REMAIN OVERSUPPLIED IN 2015: PRICE FORECAST $70/T - WOOD MACKENZIE
 COALspot.com: With January witnessing the price of iron ore falling to its lowest levels since May 2009, Roger Emslie, Principal Metals & Mining Consultant for Wood Mackenzie says there is little to suggest the picture is likely to pick up in 2015 with demand set to remain "slower not lower" and therefore prices will remain low for longer.
Addressing delegates at the Mining Indaba conference in Cape Town, Mr Emslie asserts; "It’s hard to believe, but 2015 has started even worse than 2014 finished. Having commenced January just above US$70 a tonne , the TSI 62% Index was trading at US$62/t by the close of the month resulting in a monthly average of US$67/t CFR – its lowest since May 2009."
According to Wood Mackenzie's iron ore market outlook, demand is unlikely to show any meaningful improvement until late Q1 or early Q2 due to a combination of seasonal and cyclical reasons. Mr Emslie adds: "We have lowered our Q1-15 price forecast to US$67/t CFR and our CY-15 price to US$70/t CFR (basis 62% Fe sinter fines)."
Explaining Wood Mackenzie's short-term outlook in more detail Mr Emslie says: "Iron ore prices may be languishing at their lowest level for nearly six years, but it remains difficult to make a positive case for prices in the short term. Chinese steel mills have cut production in recent weeks due to a combination of weak demand and planned maintenance and this is feeding through directly to iron ore requirements. With the Lunar New Year holidays just a few weeks away Chinese steel production will get worse before it gets better. Steel mills will not re-stock in a falling or stagnant market and when they do there should be plenty of slack in the system, as shown by the high level of inventory held at Chinese mines.
Outside of China the picture is similarly uninspiring due to a combination of seasonal and structural factors. Other than the Middle East and India none of the major iron ore importers have shown any meaningful improvement in demand, a situation that is unlikely to change in the short term."
"The outlook for Q2 is marginally better: Chinese mills should start re-stocking post Lunar New Year, driven by seasonally stronger domestic demand and a pick-up in exports of steel products. This should coincide with slightly tighter seaborne supply as Australian exports reach a temporary plateau and high cost suppliers elsewhere remain out of the market."
Wood Mackenzie warns that if the iron ore price remains in the low $60/t range then more closures from mid-tier producers seem likely and more asset write-downs are a near certainty: "As recent announcements show, there’s only so far that cost cutting can go before difficult decisions need to be taken concerning the long term viability of a mine in a structurally oversupplied market," Mr Emslie adds.
So what led to the collapse in prices? "Australian exports surged ahead by approximately 140 million tonnes (Mt) in 2014 based on investment decisions made several years ago when prices were higher and the long term view was more bullish," says Mr Emslie, "As supply ramped up in 2014, Chinese steel demand did the unthinkable and contracted for the year creating a clear disconnect between supply and demand, marking a decisive turning point for iron ore."
On Chinese imports, which crucially account for 66% of the global total, Mr Emslie says: "2014 finished on a high for Chinese imports (in volume terms not value) with China importing a record 86.9Mt in December." The total value of Chinese imports (in US dollar terms) fell in 2014, despite the volume rising by over 100Mt. Mr Emslie explains; "China’s import bill for iron ore peaked at $112 billion in 2011 (when iron ore prices averaged $168/t) but have subsequently fallen by 16% to $95 billion in 2014. China should see another significant drop in its iron ore import bill in 2015 as significantly lower prices and freight costs more than offset higher volume. We currently forecast a 30Mt rise in Chinese imports of iron ore this year with strong growth in Australian shipments partially offset by price related cutbacks elsewhere."
Pointing to more recent to iron ore news from Australia in January Mr Emslie comments on the impact of sustained oversupply; "The series of announcements and data we've seen provides further evidence of the widening gap between the major miners and the rest of the supply chain. Fourth quarter production reports from Rio Tinto, BHP Billiton and FMG confirm that their low cost expansions are progressing well, paving the way for even higher output in 2015/16." Mr Emslie concludes; "The strong performance of the majors comes at the expense of relatively high cost mid-tier suppliers who are scaling back investment and cutting production in response to low prices and compressed margins."
Iron ore in numbers:
- Iron ore price forecast for Q1 2015 is $67/t CFR.For CY 2015 $70/t CFR (basis 62% Fe sinter fines)
- Global iron ore production 2201 million tonnes (2014)
- Global imports 1404 million tonnes (2014)
- Chinese imports 930 million tonnes (2014)
About Wood Mackenzie
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Monday, 05 January 15
FIVE ENERGY SURPRISES FOR 2015: THE POSSIBLE AND THE IMPROBABLE - KURT COBB
The coming year is likely to be as full of surprises in the field of energy as 2014 was. We just don't know which surprises! I am not predictin ...
Monday, 05 January 15
THE SHIPPING MARKET IN 2014 AND LOOKING FORWARD - BIMCO
2014 started with plenty of optimism for a considerably better global economy and an improved shipping market. Things turned out somewhat different ...
Monday, 05 January 15
API 5 FOB NEWCASTLE COAL SWAP FOR Q1'15 DELIVERY CLOSED US$ 0.45 HIGHER COMPARED TO Q2'15 CLOSING
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 0.60 per MT (-1.15%) month over month and gained US$ 0.02 (+0.04%) ...
Sunday, 04 January 15
BALTIC DRY INDEX CONTINUES ITS DECLINE IN 2015
Wish you all a very Happy New Year 2015. The last report was dated 19th Dec 2014 and due to Christmas and new year holidays no reports were publish ...
Saturday, 03 January 15
U.S WEEKLY COAL PRODUCTION FELL 11.2% TO 17.6 MMST WEEK OVER WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.6 million short tons (mmst) of coal ...
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- Thiess Contractors Indonesia
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- Meralco Power Generation, Philippines
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- The State Trading Corporation of India Ltd
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- The University of Queensland
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- Chamber of Mines of South Africa
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- Bangladesh Power Developement Board
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- Standard Chartered Bank - UAE
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- McConnell Dowell - Australia
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- SMC Global Power, Philippines
- Planning Commission, India
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- Electricity Generating Authority of Thailand
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- IEA Clean Coal Centre - UK
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- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Indonesian Coal Mining Association
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- Parliament of New Zealand
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- Ministry of Finance - Indonesia
- Cement Manufacturers Association - India
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- Merrill Lynch Commodities Europe
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- Tata Chemicals Ltd - India
- International Coal Ventures Pvt Ltd - India
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- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Intertek Mineral Services - Indonesia
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- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
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- Mercuria Energy - Indonesia
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- Formosa Plastics Group - Taiwan
- GN Power Mariveles Coal Plant, Philippines
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Therma Luzon, Inc, Philippines
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
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- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
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- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Baramulti Group, Indonesia
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Tamil Nadu electricity Board
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Rio Tinto Coal - Australia
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- Vizag Seaport Private Limited - India
- CNBM International Corporation - China
- Sindya Power Generating Company Private Ltd
- Bharathi Cement Corporation - India
- Bhoruka Overseas - Indonesia
- Minerals Council of Australia
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
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- Videocon Industries ltd - India
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
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- PowerSource Philippines DevCo
- PetroVietnam Power Coal Import and Supply Company
- New Zealand Coal & Carbon
- Antam Resourcindo - Indonesia
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Bukit Baiduri Energy - Indonesia
- Deloitte Consulting - India
- SMG Consultants - Indonesia
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
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- Medco Energi Mining Internasional
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- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Commonwealth Bank - Australia
- Bulk Trading Sa - Switzerland
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
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- Carbofer General Trading SA - India
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- PTC India Limited - India
- Attock Cement Pakistan Limited
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- Xindia Steels Limited - India
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- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
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- Independent Power Producers Association of India
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Jindal Steel & Power Ltd - India
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