WILL IRON ORE BELOW USD 50/MT IN 2018?

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Kristina Wood
6 years ago
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1 ORE INSIGHT WILL IRON ORE BELOW USD 50/MT IN 2018?

2 Rise in iron ore inventory at Chinese major ports: Will Iron Ore Prices Fall Below USD 50/MT in 2018? The Steel industry looks up to China for the forecast and plans its successive move to make the most of the opportunities available in the market. The current trends in Chinese market speak volumes to predict what the future holds for the steelmakers all over the world. Below are some of the indicators everyone that is related to the industry should watch for in coming days. Iron ore stock at Chinese major ports have increased from MnT on 21 Apr'17 to MnT on 05 May 17. The abundant supply of parked iron ore on Chinese ports has been having its unfavorable effect on global iron ore prices. The prices fell consistently for more than a few weeks now. Thirteen years high inventories at Chinese major ports are being looked at as a catalyst along with few other factors that will change the course for the rest of 2017 and the year next for iron ore prices. Increasing iron ore supplies from Australia, Brazil & India: The other detriment is offcourse the production itself that has steadily been growing for some time in major iron ore producing countries. Pg 01

Brazil India The numbers for the quarter ended in suggest that Vale s production grew by 11% YoY at 86.20 MnT over 77.

3 Brazil India The numbers for the quarter ended in suggest that Vale s production grew by 11% YoY at MnT over MnT for corresponding period last year due to the rampup of the S11D and Itabiritos projects in the Southeastern System, it is estimated to produce MnT iron ore by the end of 2017 which would mean a minimum of 3 % increase against MnT production in 2016 Indian iron ore output for JanMar quarter is assessed by SteelMint at 56 MnT and is expected to reach between MnT by the end of CY17. India produced 182 MnT iron ore in CY16 an increase of 30% YoY compared to MnT in Cy15. Australia A realistic view of supply over demand projects prices coming down to similar to the end of May 16 at USD 50/MT CFR China contrary to the anticipated increase in Chinese steel consumption, the buying is slowed down by the manufactures, some mill owner are preferring the local lower grade material in China over the higher grade foreign imported concentrate. In previous few weeks even after compromising prices the suppliers could not strike any large deals under tremendous pressure as buyers waited for further price fall to replenish their stocks. Australian BHP Billiton the third largest iron ore producer s output grew by 3.4% for Q2 at 60 MnT over 58 MnT in Q1 FY17. According to the report, the miner produced 118 MnT iron ore during ﬁrst half of FY17. For Australian FY17, the miner maintains its production guidance between 228 and 237 MnT iron ore excluding production at Samarco. The miner produced 227 MnT iron ore during Australian Fy16. Moreover, the Western Australian Iron Ore (WAIO) output is recorded at 136 MnT in ﬁrst half of FY17. The output increased by 4% YoY as it was 131 MnT during same time period a year earlier. In Q2 FY17, production from WAIO remained at 70 MnT. WAIO s output is recorded at 257 MnT in FY16. The output rose by 2% YoY as its Jimblebar mining hub operated at full capacity. The miner increased its forecast between 265 and 275 MnT for FY17. Along with a focus on productivity and the rampup of additional capacity at the Jimblebar mining hub, the company aims to increase its system capacity to 290 MnT pa in the FY19. The expert predictions of high prices to be aﬂoat began to erode from the end of as soon speculators lack of interest bought the prices for the steel making material down below USD 80/MT CFR China after the futures were abandoned all of a sudden. Intermittent rise with penny ante increase could not sustain the splendor for the material that attained the 30 months highest price on Feb, 21st 2017 at USD 95/MT CFR China. Iron ore prices swirled down and hit almost a eightmonth low status at USD 59.5/MT CFR China on 05 May 17 as speculators evaluated the signs in the market from the largest consumer of iron ore China, there was also a steel output at a record in the month of March along with obvious increase in supply. A miner from Brazil, Vale is setting up a new facility, to boost up seaborne sales, presently miners in China have also increased the production levels. Pg 02

Chinese Iron Ore Imports Vs Monthly Average Spot Iron Ore Prices 100 100 90 90 80 80 70 Min 40 82.2 95.6 83.5 92.0 88.8 80.8 93.0 50 87.7 % Change Max 88.4 % Change 81.6 60 86.

0 70 60 50 40 30 340 360 380 6% 12% 30 20 BHP Billiton 227 228 237 0% 4% 20 10 Western Australian Iron Ore (WAIO) 257 265 275 3% 7% India 182 210* 220* 15% 21% Total 1006 10 1112 6% 11% Figures in

4 Chinese Iron Ore Imports Vs Monthly Average Spot Iron Ore Prices Min % Change Max 88.4 % Change Guidance Max Min 83.9 Producer 2016 Production % 12% BHP Billiton % 4% Western Australian Iron Ore (WAIO) % 7% India * 220* 15% 21% Total % 11% Figures in MnT Source: Company Reports, SteelMint *Expected China's increased iron ore imports & rising domestic iron ore output: China's appetite for iron ore seems unending. The China iron ore imports were up 9% at MnT for the ﬁrst four months in 2017 as well against MnT for the JanApr in 2016.On the other hand, China's crude iron ore production in the ﬁrst quarter of 2017 was registered at MnT, signiﬁcantly up by 15% YoY as it was MnT in the same period last year. Quantity In MnT Vale 10 0 Apr16 May16 Jun16 Jul16 Aug16 Sep16 Prices in USD/MT,CFR(Monthly Average) Estimated production by three major iron ore producing countries for CY17 Oct16 Nov16 Dec16 Jan17 Feb17 Mar17 Apr17 China Iron Ore Import(MnT) Spot Iron Ore Prices (Monthly Average) Declining Chinese steel prices: Amid weakening steel futures, Chinese domestic as well as export steel prices witnessed sharp plunge since beginning of Mar'17. For instance, Chinese HRC export offers have come down from USD 510/MT, FoB China in beginning of Mar'17 to currently prices of USD /MT, FoB China. On similar lines, Chinese rebar export offers have come down from USD 475/MT, FoB China in beginning of Mar'17 to current assessment of USD /MT, FoB China. It seems the price decline spree is not coming to an end anytime soon. Unless some drastic measures are taken by the largest consumer of iron ore, the graph is headed only to south to slow down the already staggered market. Pg 03

5 IRON ORE MARKET SCENARIO Iron ore prices INDIAN IRON ORE PRICES Mine/Origin Size (mm) Grade (Fe %) Current Price Last Month s Lowest Last Month s Highest MoM Rungta Mines, Odisha ,000 1,725 4,300 3,950 1,825 4,300 3,950 1, Essel Mining, Odisha ,450 3,350 1,275 3,750 1,425 3,750 1, Indrani Patnaik, Odisha ,150 2,800 1,400 3,450 1,150 3,450 1, 100 KJS Ahluwalia, Odisha ,350 1,400 3,350 1,525 3,350 1, Serajuddin Mines, Odisha 518 1,350 3,400 1, 1, Kaypee Enterprises, Odisha ,250 3,000 1,410 3,550 3,250 1,535 3,550 3,250 1, NMDC, Chhattisgarh 1040, DR CLO 10150, ROM 640, Baila Lump Baila ,790 2,195 2,425 2,185 2,790 2,195 2,425 2,185 2,790 2,195 2,425 2,185 NMDC rolled over iron ore prices for May 17 deliveries. Karnataka eauctions Lump 60 2,650 2,248 2,530 2,240 2,530 2, NMDC kept iron ore base prices unchanged for May 17 eauctions. Lump Goa eauctions Major Odisha based merchant miners slashed iron ore prices over sharp decline in eastern India pellet offers and dull demand post decline in sponge prices. 19th eauction was conducted on 21 Apr 17. Out of 2.16 MnT iron ore offered, only 0.19 MnT was sold. There was participation from single bidder Timblo Pvt Ltd. GLOBAL IRON ORE PRICES Australia India 58/ Spot iron ore prices in China crashed by USD 17/MT MoM amid declining iron & steel futures as well falling domestic prices. Indian prices in INR/MT, Global prices in USD/MT, CFR China Rungta Mines & Indrani Patnaik prices are loaded to wagons & incld Royalty, DMF & NMET, rest Odisha miners prices are exmines NMDC (C.G.) prices are FoR, Royalty, DMF, NMET & other taxes extra Karnataka eauction bid prices are weighted avg & basic Goa eauction bid prices are basic Pg 04

6 Indian Iron ore Production, Sales, Imports & Exports Apr 17 Production In FY17, Odisha s iron ore production was recorded at 94.2 MnT, up 24% YoY Dispatches In FY17, iron ore dispatches from Odisha based merchant miners summed up to MnT, up 33% YoY. Production NMDC s iron ore output rose 20% YoY to MnT in FY17. Sales NMDC s iron ore sales rose 23% YoY to 35. MnT in FY17. Imports In Apr 17, there were two importers JSW Steel (0.16 MnT) & KIOCL (0.12 MnT). Exports In Apr 17, Vedanta was the largest exporter at 0.78 MnT followed by Fomento Resources & VM Salgaonkar. Odisha iron ore production & dispatches NMDC iron ore production & dispatches Indian iron ore imports & exports Source: Odisha govt., NMDC, Customs, SteelMint Research Fig in MnT Odisha dispatches ﬁg are excluding captive iron ore movement of SAIL, Tata Steel, JSPL and movement for exports Odisha production ﬁgures includes that of captive miners SAIL, Tata Steel & JSPL Pellet prices Iron ore/pellet sourcing pattern of India s major steel makers Region/ Iron ore /Pellets Jan 17 JSW Steel Iron ore Essar Steel Iron ore Pellets Iron ore Pellets Bhushan Steel Last Month s lowest MoM DOMESTIC PELLET PRICES Name of steel making company Grade Last Month s highest Current Prices Barbil 4,0004,200 4,200 4, Jharsuguda No offers 4,800 5, Durgapur 4,4004,600 5,000 5, Raipur 4,7004,800 4,750 5, Bellary 6,0006,100 6,200 6, Kandla 5,400 5,400 6, 900 Qty in MnT Provisional data, Source: SteelMint Research, Customs Lesser realizations in export forced few Indian pellet makers to focus on domestic sales. Fall in PDRI prices and limited trades resulted in further drop in pellet offers. GLOBAL PELLET PRICES FoB India Declining global prices reduced Indian pellet export offers. Prices in INR/MT, Barbil prices are loaded to wagons, Kandla prices are delivered, rest prices are basic FoB India prices in USD/MT Pg 05

7 Indian Pellet Imports & Exports Pellet imports Nil Pellet exports 0.78 Apr 17 Nil Nil Apr 17 did not observe any pellet import shipment to India In Apr 17, Essar Steel was the largest exporter at 0.16 MnT followed by BRPL and JSPL Qty in MnT Source: SteelMint Research, Customs MILL SCALE MARKET SCENARIO GLOBAL MARKET SCENARIO Mill Scale Prices Spot lump and pellet premium Grade Last month s highest Prices Last month s lowest DOMESTIC PRICES Raipur Fe 70/68% 2,400 2,200 2,400 Kandla Fe 70/68% 2, 2, Domestic mill scale prices fell amid dull trades in Apr 17. GLOBAL PRICES FoB India Fe 70/68% Plunge in spot iron ore prices in China reduced Indian mill scale export offers. Raipur prices are exworks and Kandla prices are delivered in INR/MT FoB India prices are in USD/MT Source: SteelMint Research Indian mill scale exports 18, 104,820 Apr 17 40,700 Three mill scale export vessels were seen in Apr 17. Entire quantity of mill scale exported was to China. Size/ grade Current Premium MoM Spot Lump Premium Fe % Spot Pellet Premium BF grade, Fe 65% Amid stricter environmental concerns, lump premium has moved up marginally in last couple of weeks There was increased demand of pellets from Northern China over environmental reasons. Premium in USD/MT, CFR China Iron ore export by world's major countries Country Dec 16 Jan Australia Brazil South Africa Canada Russia Fig in MnT Source: Customs data Qty in MT Source: SteelMint Research, Customs Pg 06

8 Iron ore import by world's major countries Country Dec 16 Jan 17 REPORT BY Nishtha Mukerjee (Analyst) Call: China Japan South Korea Taiwan Sunil Parkhe France Analyst Fig in MnT Source: Customs data China's crude ROM production Nov Dec Jan Fig in MnT Source: National Bureau of Statistics Vessel freight to China Route Vessel Type HEAD OFFICE #301, Jeevan Parisar, Rajeev Nagar Behind Crystal Arcade Raipur (C.G) India Web: INDIA OFFICE RAIPUR KOLKATA Freight in USD/MT Indian East Coast Supramax 7.71 Brazil Capesize South Africa Panamax 9.31 DISCLAIMER: This report is an exclusive copyrighted work of steelmint.com and cannot be reused or published without prior permission from SteelMint. The company shall not be liable for any decisions being made based on the data and information contained in the report. It shall also not be liable for any consequences, inaccuracies and omissions contained therein. Pg 07

Isigni icant augmentation in this iscal.

Indian Production Likely to Touch 180 MnT in FY17 ndia s iron ore production is witnessing Isigni icant augmentation in this iscal. SteelMint anticipates state's iron ore production to touch 180 MnT in