IRON ORE. Iron Ore Swap prices

Transcription

1 MT USD (Million) IRON ORE Iron ore forward prices (USD/mt) Close (Apr 15th) Ch. Daily Ch. 1 Apr-11 $ $0.08 -$2.73 May-11 $ $2.17 -$7.34 Jun-11 $ $2.42 -$6.43 Jul-11 $ $1.38 -$6.50 Aug-11 $ $1.00 -$6.50 Sep-11 $ $0.63 -$6.50 Oct-11 $ $0.53 -$4.63 Nov-11 $ $0.50 -$4.00 Dec-11 $ $0.47 -$3.38 Jan-12 $ $0.68 -$2.56 Feb-12 $ $0.75 -$ $ $0.82 -$2.02 Apr-12 $ $0.86 -$1.58 May-12 $ $0.88 -$1.43 Jun-12 $ $0.89 -$1.29 Jul-12 $ $1.07 -$0.11 Aug-12 $ $1.13 $0.28 Sep-12 $ $1.18 $0.67 Oct-12 $ $1.23 $1.02 Nov-12 $ $1.25 $1.14 Dec-12 $ $1.27 $1.25 Jan-13 $ $0.81 $1.80 Feb-13 $ $0.66 $ $ $0.50 $2.17 Lack of direction on the physical iron ore market together with decline on steel futures market in Shanghai, contributed to lower traded levels on the iron ore swaps. Although market is tight it is clear buyers resistance to take cargos in the $ range. Some analysts argue that at these levels margin is limited to only 3%. Iron Ore Swap prices Apr 2010 = -1.66% May 2010 = -4.94% Jun 2010 = -4.62% Q2-10 = -3.69% Q3-10 = -3.78% Q4-10 = -2.64% Cal 12 = -0.34% Cal 13 = -1.81% *Weekly change The Steel Index reported mixed results for 62% and 58% grades. The first slightly up by 0.39% and the second down 0.70%. Some decent volumes seen in the swap market, higher than the average ly volume in A number of spread trades reported by brokers due to market uncertainty. SGX cleared 504,000 tons. Iron ore Forward curve Weekly Swap Volume ,000 $ ,000 $ ,000 $ ,000 $ ,000 $ ,000 $ th Feb 1st 2nd 3rd 4th 1st Apr 2nd Apr 3rd Apr $0 Close Ch. 1 Day Ch. 1 LCH SGX Value - Close on 15 th April

2 23-Feb Apr 13-Apr 62% Fe 58% Fe STEEL Iron ore stockpile in the 19 major Chinese ports recoup the big drop a before gaining 1,450,000 tons to a total of 85,970,000 tons. Unlike seen in the iron ore market Umetal reported ly increases for main Chinese steel products in the spot market. Rebar, Wire rod, HRC and Plate ended the higher 1.56%, 1.34%, 1.15% and 1.24% respectively. The Shanghai Exchange rebar contract ended lower. May and October, closed the down 1.34% and 1.61% respectively. The contracts remained flat throughout most of the and saw a big fall on Friday as traders remain cautious on market direction. According to China s National Development and Reform Commission the country may produce more than 700 million tons of crude steel this year in anticipation of higher demand. Rebar (SHFE) Close on 15th Change Volume % of total volume Apr contract= % % May contract= % % Jun contract= % % Jul contract= % % Aug contract= % % Sep contract= % % Oct contract= % % USD Spot Index (TSI) USD RMB Steel spot prices (Umetal) % Fe 58% Fe Rebar Wire rod HRC Plate Lots 1,200,000 1,000, , , , ,000 0 SHFE - Rebar Daily Volume Tons ('000) Weekly stockpile (Chinese ports) 65000

3 Extra Info The following two charts compiled by Citigroup give a good idea of the iron ore market cycles and its timings. The first shows longest price rallies seen in the market in the last 100 years, and points that current rally has been on for 9 years. The second chart illustrates the length of Bull and bear cycles.

4 News Highlights China Braces for Increased Iron Ore Volatility, Eyes Latin American Expansion (Businesswire) Erik Bethel, Managing Partner of Shanghai-based SinoLatin Capital, the premier investment platform between China and Latin America, discussed the status of the Latin American iron ore industry at the CBI Iron Ore Trading & Investment Conference in Hong Kong. The conference is one of the preeminent summits of the world s mining, iron and steel industry highlighting the Chinese steel market, future trends, and China s outbound acquisition strategies. Despite concern over a perceived property bubble, China s demand for iron ore in 2011 could grow at even higher levels than last year, noted Mr. Bethel. We believe the main driver of this phenomenon is urbanization. Since the year 2000, China has moved roughly 20 million people per year into cities, observed Mr. Bethel, and the country is still 60% rural, something that Beijing is keen on changing. Three large multinational mining firms (BHP, Vale SA, and Rio Tinto) control 80% of the world s seaborne iron ore trade. In recent years, China has found itself at the mercy of these firms, as the country s steel mills have had limited pricing leverage. This has led Chinese firms to purchase iron ore assets overseas in Africa, Australia, and more recently in Latin America. The focus of SinoLatin Capital is in helping Chinese firms do deals in Latin America, stated Bethel, and iron ore is of particular interest. The biggest impediment in the iron ore industry, however, is a lack of logistics. Everyone knows that there is a lot of iron ore in Brazil, Peru, and other countries in the region. But how do you get the iron ore to China? Latin America s rail and port infrastructure is (today) woefully inadequate. At the conference, Bethel discussed several Latin American iron ore projects in detail and how they were perceived in China. There are a number of excellent investment opportunities in Latin America, quipped Bethel, and the math is straightforward: China has few domestic sources of iron ore, is urbanizing 20 million people per year, has amassed a tremendous amount of capital with which to go on an overseas M&A binge, and it desperately needs iron. What we are witnessing is a long-term commodity super-cycle, and I don t see this changing any time soon. NDRC: Some Chinese mills halt spot purchases of overseas iron ore (Steel Orbis) Facing pressure from high costs, some Chinese steel mills have decided to stop purchasing iron ore on the spot market from overseas suppliers, according to a statement from China's National Development and Reform Commission (NDRC). The NDRC stated that, because the current spot price of 63 percent grade iron ore has reached about $185/mt, leaving major domestic mills with a profit margin of only around three percent, some Chinese steel mills have decided to stop purchasing imported iron ore on the spot market. In the meantime, iron ore inventories at 19 main Chinese ports are at among their highest levels of the past several years, totaling million mt, though they have decreased by 1.56 million mt on -on- basis Rio Tinto, Fortescue See Iron Ore Production Levels Fall (Business wire Australia) Quickly bouncing back from the storms that shook Australia just a few short months ago, Rio Tinto is reporting that its coal, iron ore, uranium and alumina operations are benefitting from strong prices. Chief executive Tom Albanese said, We have successfully gained control of Riversdale Mining Limited and plan to accelerate the development of these significant tier one coking coal assets. On Thursday at a shareholders meeting in London, Albanese said, We...expect demand to be largely unaffected by the tragic events in Japan and indeed, after this year, demand levels may well increase due to reconstruction efforts, the Wall Street Journal reported. Despite the mining giant reporting an increase to 225 million tons per year at the Pilbara iron ore operations, analysts are reporting that the decrease in output of iron ore and coking coal is surprising. According to The Australian, Deutsche Bank cut its full-year 2011 earnings per share forecasts for Rio by 2 per cent. Rio reported lower first-quarter year-on-year output of iron ore, uranium, coking coal, copper and aluminum but flagged an increase in full-year iron ore and coking coal production, even though force majeure is still in place at one Queensland coalmine. Rio Tinto isn t the only mining company reporting lower-than-expected production numbers. Fortescue, another prominent iron ore miner, said operating costs rose 8 per cent during the quarter to $45 per ton. The company also saw iron ore shipments drop nearly 16 per cent in the first quarter to 8.4 million tons, due to the heavy storms. Despite the miners positive outlooks, analysts expect that full-year 2011 earnings per share will fall by up to by 4 per cent. Rio tinto says iron ore market to remain tight (Reuters) The global market for iron ore will remain tight in the near to medium term, with demand running strongly and new supply coming on slowly, miner Rio Tinto said. "We believe that the market for iron ore will remain tight in the short to medium term with delays to new supply and strong demand driving prices," the world's second-largest producer of the steel-making raw material said in a statement released to the Australian stock exchange on Friday.

5 Chinese steel output growth to slow down in next 5 yrs China's steel output growth will slow down to an average annual expansion of 6% over the next five years amid the country's efforts to restructure its economy, citing Mr Li Shijun chief analyst for the China Iron and Steel Association. Mr Li told attendees at a meeting in Shanghai on the steel industry's development strategies that the peak for the annual output of China's steel industry in the next five years would likely be around 850 million tonnes. Mr Li said "Steel consumption will be restricted in the next five years as China moves to reduce its reliance on investment and exports and depend more on consumption to drive the economy." According to CISA's statistics, China's crude steel output reached a new high of 627 million tonnes in 2010 after the industry's average annual growth rate slowed to 12% during the 11th Five-Year Plan period from 2006 to 2010, compared to 22.6% from 2001 to Steel output may hit 700million tons (Shanghai Daily) CHINA may produce a higher-than-expected 700 million tons of crude steel this year in anticipation of higher demand, the nation's top planning agency said yesterday. The National Development and Reform Commission made the annual projection based on the average daily output of 1.93 million tons in the first quarter of this year, citing figures from the China Iron and Steel Association. The government and an industry group earlier estimated this year's output at 660 million tons. China produced 627 million tons in "A further increase in steel output is brewing competition in the domestic market," the NDRC said in a statement, noting that the industry's profit margin further narrowed. Squeezed by high iron ore and coking coal prices, key steel companies only make a 3 percent margin on profits, the NDRC said, adding some steel mills have stopped ore imports in the cash market to ease cost pressure. While the government's plan to build more affordable homes and rapid urbanization will boost steel demand and Japan's reconstruction after the earthquake and tsunami may raise hopes of higher exports, the NDRC cautioned against a "strong rebound" in the steel market because of China's prudent monetary policy to curb inflation and its tightening of the property market. Demand for long products, used in construction, is rising amid seasonal demand but that for steel plates, used in the auto and home appliance industries, remains weak, said Qiu Yun, an analyst at Mysteel Research Institute. Rio Tinto first quarter iron ore output falls 3pc due to weather disruptions (The Australian) Angang Steel Falls After Saying Profit Probably Declined 94% (Bloomberg) Dry bulk commodity demand growth is expected to be around 7-8% in 2011 (Balkans) Ask a Legal Question This section, dedicated exclusively to members of IOSDA, enables members to ask a legal question (always subject to HFW terms and conditions*) on, for example, a suggested clause for a metals contract or an issue under a metal/ore charterparty. The law firm Holman Fenwick Willan LLP have offered this facility. We are assured by HFW that the first three questions received will be answered at no cost. Contact us if you are interested. *

6 17th International Iron Ore Symposium June 2011, President Wilson Hotel, Geneva, Switzerland ~ 20% discount for Iron Ore & Steel Derivatives Association members ~ Metal Bulletin Events' International Iron Ore Symposium is the world s leading iron ore event. An unparalleled group of distinguished guests gathers to hear from and meet with an industry-leading line-up of expert speakers from throughout the global iron ore community. The most important event in the iron ore industry Roberto Carvalho, Chief commercial Officer, Samarco An expert programme of speakers will discuss and debate key industry issues, giving you an insight into what is happening, where and with whom, from mine to marketplace, in this dynamic and global growing industry. Key issues to be addressed include: The future of iron ore pricing - monthly to spot, or back to annual? An insightful focus into real demand and real supply The developing role of banks in the physical market The outlook for Chinese domestic ore and its effect on Chinese sourcing Projects in Africa: who, where and when? Indian ore exports, and how traders are supplying the Chinese market The future of the indexes, will one prevail? Can steel producers use the pricing mechanism to their advantage? Whether you are a miner, trader, producer, refiner, steel company, purchaser, financier, regulator, shipping company or end-user; the 17 th International Iron Ore Symposium promises to be the biggest yet and is an event not to be missed for any serious player in global iron ore. Benefits of attending: Challenge to opportunity: change the way you use developments in the pricing system Gauge market direction from industry leaders Become an active participant in shaping the future of the iron ore industry Effectively prepare for an increase in supply Build a base to grow your business To register: To register and benefit from your 20% discount, please call the credit card hotline + 44 (0) and mention the code IOSDA to get your discount. (discount not available online)