Australian Wheat Exports Seen at 5-Year Low as Output Drops

By Phoebe Sedgman  Dec 9, 2014
Bloomberg
Wheat shipments from Australia will probably drop to the lowest in five years as dry weather curbs supplies in the world’s fourth-biggest exporter, according to a government forecaster, which cut its outlook 6.1 percent.

Exports in the year started July 1 may total 16.99 million metric tons, from 18.1 million tons forecast in September and last year’s total of 18.3 million, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a quarterly report today. That would be the lowest level since 2009-2010, according to the Canberra-based bureau.

Wheat in Chicago fell to a four-year low in September amid forecasts for record global supplies and rising inventories before rebounding in October and last month on concern that harsh winter weather will hurt Russian crops. Australia last week lowered its wheat-production estimate to 23.2 million tons from 24.2 million tons after dry weather curbed yields in eastern growing regions. The country had its hottest spring on record this year, according to the Bureau of Meteorology.

“The forecast decline in production is expected to be driven by a 16 percent fall in the average yield,” Abares said in the report. “Yields are expected to decline in all major producing states.”

Wheat for March delivery fell 0.8 percent to $5.9325 a bushel on the Chicago Board of Trade at 11:48 a.m. in Singapore. Most-active prices are still 25 percent higher than the year’s lowest close on Sept. 25. Hard red winter wheat for for March delivery fell 0.5 percent to $6.36 a bushel.

Global Production

Hard-red winter wheat, the most-exported U.S. variety, may average $285 a ton at U.S. Gulf ports in the year started July 1, unchanged from a September estimate and compared with $317 a year earlier, Abares said. A decline in U.S. hard-red winter supplies and quality issues with the 2014-2015 harvest in other major wheat-producing countries, including France and Ukraine, may reduce downward price pressure, it said.

Global production may total 718 million tons in 2014-2015 from 714 million tons forecast in September and 713 million a year earlier, according to Abares. Inventories at the end of 2014-2015 may reach 192 million tons from 185 million tons a year earlier, it said.

The U.S. Department of Agriculture forecast on Nov. 10 that world wheat output would total a record 719.9 million tons, boosting reserves to a three-year high.

The Agricultural Market Information System raised its forecasts this month for global wheat, corn and soybean production for the year that started on July 1. Combined output of the crops will reached a record 2.05 billion tons, according to a report from the group set up by Group of 20 ministers.

Coal shortages ease at Indian power stations

NEW DELHI Wed Dec 10, 2014
(Reuters) - The number of thermal power plants with less than seven days of coal stocks fell to 50 last week, down from 61 in early November when shortages threatened to stoke a power crisis, government data showed on Wednesday.

On an average, 100 power plants had enough coal to last a week on Dec. 4, the Central Electricity Authority (CEA) said, far below the 15-30 days the CEA sets as an operating norm.

However, cooler seasonal weather this month has reduced demand for power and eased concerns of widespread blackouts.

India, which relies on coal for about three-fifths of its energy needs, is turning to increased coal imports because of insufficient domestic mining, despite the country sitting on the world's fifth-largest reserves.

Twenty eight of the power stations had less than four days coal supplies on Dec. 4, down from 35 on Nov. 2, the CEA said.

(Reporting by Tommy Wilkes; Editing by Himani Sarkar)

Iron Ore Outlook Cut by JPMorgan as BHP, Rio Shares Extend Slump

By Jasmine Ng  Dec 9, 2014
Bloomberg
Iron ore prices will extend declines as growth in low-cost supply from the world’s largest producers outstrips demand, according to JPMorgan Chase & Co., which cut forecasts through 2017. Mining companies’ shares sank.

The steel-making raw material will average $67 a metric ton next year, 24 percent less than previously forecast, and $65 in 2016, down 23 percent, the bank said in an e-mailed report received today. So far this year, it’s averaged $98.82 a ton, according to data from Metal Bulletin Ltd. In 2017, prices will average $69 a ton, 16 percent less, the bank said.

Iron ore is heading for the biggest annual loss in at least five years as Rio Tinto (RIO) Group, BHP Billiton Ltd. (BHP) and Vale SA (VALE5) expanded output, spurring a glut just as growth slowed in China. The larger miners are choosing to overproduce, driving prices lower and forcing the closure of higher-cost suppliers, according to Bank of America Merrill Lynch. The raw material may drop to less than $60 next year, Citigroup Inc. estimates.

“The only way the oversupply can be averted is if the low-cost producers cut back on their growth targets,” JPMorgan said in the report, which was dated Dec. 7. “This is unlikely: feedback from recent site visits to the Pilbara suggests there is currently no consideration for slowing capacity growth from either Rio Tinto or BHP Billiton.”

BHP Retreats

Ore with 62 percent content delivered to Qingdao, China, lost 1.1 percent to $69.06 a dry metric ton today, according to data from Metal Bulletin. Prices slumped to $68.49 on Nov. 26, the lowest level in more than five years, and lost 49 percent this year.

BHP lost as much as 3.3 percent to 1,390 pence, the lowest level in London since July 2009, and was at 1,404.50 at 12:03 p.m. local time. The world’s biggest mining company, which also produces oil, is 25 percent lower this year as iron ore and crude fell. Rio stock retreated as much as 3.2 percent in London, dropping for a fourth straight day.

Global seaborne output will exceed demand by 100 million tons this year from 16 million tons in 2013, according to HSBC Holdings Plc. The price will average $99 this year and $85 in 2015, the bank predicts.

“The majors have embarked on ‘shakeout’ in the iron ore market with a view to regaining market share,” Bank of America Merrill Lynch said in a report on Dec. 3. The price will average $70 next year and $65 in 2016, it said, cutting forecasts.

No Slowdown

BHP signaled that there won’t be a slowdown in the drive by global producers to boost output. If the higher “volume doesn’t come from our business, it’s going to come from other businesses,” Jimmy Wilson, BHP’s president of iron ore, said in an interview broadcast by Australia’s Nine Network on Nov. 30.

Prices will return to an average $85 to $90 next year as high-cost mines shut and Asian demand rises, Vale Chief Executive Officer Murilo Ferreira said last month. Australia’s Roy Hill Holdings Pty, developing a mine in the Pilbara, aims to be “one of the last people standing” as higher-cost suppliers close, Chief Executive Officer Barry Fitzgerald said on Nov. 20.

An additional 341 million tons of capacity will be added over the next five years by Rio, Vale, BHP, Fortescue and Hancock Prospecting Pty, the owner of Roy Hill, JPMorgan estimated. Hancock’s Roy Hill project breaks even at $60 to $70 a ton and will proceed despite weak prices, the bank said.

The economy in China, which buys 67 percent of seaborne supply, is on track to record its weakest annual growth since 1990. The central bank cut interest rates last month for the first time since 2012 and HSBC and Barclays Plc predict there will be another two cuts before the middle of next year.

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India Iron Miners Halt Exports on Weak Price, Higher Cost

By Rajesh Kumar Singh and Abhishek Shanker  Dec 10, 2014
Bloomberg
Iron ore exports from India have halted as a global price slump and an increase in royalty fees made shipments unviable for miners battling high taxes levied on overseas sales.

The third-biggest iron-ore exporting nation until three years ago didn’t sell “a single gram” overseas in October and November, R.K. Sharma, secretary general at mining lobby group Federation of Indian Mineral Industries, said in an interview, without giving specific data. Miners have sought the scrapping of a 30 percent export tax levied in 2011 to be able to resume sales, he said.

“International prices have fallen to rock-bottom and our costs have remained high,” Sharma, whose lobby group tracks data for overseas sales, said by phone. “You lose money on every ton you export.”

Even as global benchmark prices fell about 49 percent this year, in August India increased the royalty miners pay to the regional governments to 15 percent of the sales value from 10 percent. While the miners could still bear the tax when prices were in the region of $135 a metric ton until a year ago, the levy became insurmountable as prices tumbled by almost half.

“Our costs are now higher than the prices we will get in the international market,” said A.N. Joshi, vice president for iron ore at Sesa Sterlite Ltd., which was India’s biggest iron ore exporter until its operations in Karnataka state were shut by a court-ordered ban in 2011 and in Goa the next year. “The export tax has to be abolished altogether.”

‘No Exports’

The benchmark price of ore with 62 percent iron content at China’s Qingdao port was $69.06 a ton yesterday.

Shares of Sesa Sterlite rose as much as 2.1 percent to 225.40 rupees in Mumbai. The stock has risen 10 percent this year, trailing a 31 percent gain in the S&P BSE Sensex.

“There have been no iron ore exports from our port since the end of August,” said K.K. Sahu, port traffic manager at Paradip, a harbor on the eastern coast and one of the country’s main port for iron ore exports.

Environmental clampdowns by the government and the courts in the past three years led to closing of several mines, extending the crisis. The prolonged bans have prompted customers of Indian iron ore to increase their dependency on Rio Tinto Group, BHP Billiton Ltd. and Vale SA. The shuttered mines in India are struggling to reopen even months after the courts eased the curbs.

Idle Mines

More than three-quarters of India’s iron ore mines are lying idle, according to a parliament reply by junior mines minister Vishnu Deo Sai on Dec. 1. Of 776 mines in all, 590 are closed, Sai told lawmakers. All of the 330 mines in Goa are shut, while 112 mines in Odisha out of a total 143 are not operating, he said.

Mine closures have led to record shortages of iron ore and will probably turn India into a net importer of the material in the year to March 31. Indian steelmakers are set to buy as much as 15 million tons from overseas this fiscal year, almost triple the quantity imported a year earlier.

India may need to import as much as 45 million tons in the next three years, should mining curbs be maintained and demand from steel producers continues to rise, Zhuo Zhang and Kenneth Hoffman, analysts at Bloomberg Intelligence, said in a Nov. 20 report.

Miners in the western state of Goa, which was the biggest exporter of low-grade iron ore before the nation’s top court banned mining in 2012, are now free to start mining after renewing leases. At current ore prices there may not be any output at least in the year ending March 31, said Swaminathan Sridhar, executive director at Goa Mineral Ore Exporters’ Association, an industry trade body.

“Even if iron ore mining were to start from tomorrow, there won’t be any exports from Goa as under the current scenario of lower global prices and higher exports taxes from India, shipments are not profitable,” Sridhar said in a phone interview from Panaji, the state’s capital. “The miners are working toward getting their leases renewed, but for any chance of exports from Goa, the taxes have to come down.”

Miners' association tells Narendra Modi government that Indian mining sector on the verge of shutting down

By Vikas Dhoot, ET Bureau | 4 Dec, 2014,
NEW DELHI: India's mining sector is on the verge of shutting down in two months, industry bodies warned the government, citing an onerous forest clearance requirement imposed by the former UPA government's controversial environment minister Jayanthi Natarajan that would force all mines to cease operations.

"By February 2015, everything would come to a standstill," president of the Federation of Indian Mineral Industries H Noor Ahmed told ET, hoping for urgent action from the government to rescue the already troubled sector, which has contracted in the past three years.

All mines with partial forest clearances should get fresh clearances for their entire lease areas by the end of January 2015 if they want to continue operations, the environment ministry's forest wing had said in a directive issued with the approval of then minister Natarajan on February 1, 2013.

With the deadline weeks away, both FIMI and the Confederation of Indian Industry (CII) have redflagged the issue afresh with the ministries of mines and environment and forests and are planning to approach the Prime Minister's Office if the green ministry doesn't act soon.

Fearing a serious impact on mining and consequently, manufacturing, industry has suggested that the government should either withdraw the diktat or at the very least, extend the January 2015 deadline.

The problem, according to industry is that almost all mines in the country have been working with partial forest clearances and getting a forest clearance takes five to seven years, making it impossible to meet the two-year deadline.

Moreover, they argue that diverting the entire forest area in a mining belt at one go, instead of a phased manner, is not a prudent approach to conserving green cover. They have also pointed out that getting non-forest land for compensatory afforestation is a challenge in mineral-rich states.

The impasse on forest clearances for mines was incidentally part of a laundry list of green clearance headaches faced by investors, shared by industry with the PMO in the early days of the Modi government. Separate representations made to the environment, forest and climate change minister Prakash Javadekar, including a detailed missive sent by CII this August, have elicited no action.

"State governments have already started truncating the leases based on the area for which forest clearance has not been obtained... We request you to kindly take a considerate view of this issue being faced by mining industry as many of the mines are now on the verge of being closed," CII said in a November 12 letter to environment secretary Ashok Lavasa reviewed by ET.

FIMI members also met Lavasa on the imbroglio in late November. "We have requested him to amend the rules. I hope that some action is taken soon," said Ahmed.

Eighty percent of India's mineral riches are in tribal-dominated regions, with a very dense forest cover. About 70% of districts with large mineral deposits are classified as backward and over half of those are in areas affected by Maoist insurgency. Just 11 states, including Andhra Pradesh, Gujarat, Odisha and Jharkhand account for nearly 94% of India's total operating mines.

"The forest area approved should not be lesser than the total forest area included in the mining lease approved under the Mines and Minerals (Development and Regulation) Act of 1957. Both necessarily have to be the same," according to the environment ministry diktat.

"Mining in such leases will be allowed only if the user agency either obtains approval for the entire forest land located within the mining lease or surrenders such forest land for which approval has not been obtained and execute a revised mining lease for the reduced lease area," it stated.

               

NMDC slashes iron ore prices

PTI
NEW DELHI, DEC 4:
In a relief to major domestic steel firms, state-run iron ore miner NMDC has reduced price of lumps by Rs. 200 a tonne and Rs. 100 per tonne for fines for the current month on tumbling global prices and lower demand.

NMDC, India’s largest iron ore producer, had reduced the price for lumps by Rs. 200 per tonne in November. It, however, did not change the price for fines last month.

Following the reduction, the price of lump ore, which has more iron content and is used mostly by domestic steel makers, now stands at Rs. 4,200 per tonne. The prices of fines, having less content of iron or the inferior grade, now come down to Rs. 3,060 per tonne.

The miner reviews the prices of the key steel-making raw material every month going by the global prices and domestic demand, had not tweaked rates during the July-October period.

Global iron ore prices have nosedived to five-year low at around $70 per tonne mainly because of subdued demand from China, the largest producer of steel in the world.

The holding on of the price by NMDC during the four-month period coupled with inadequate availability within the country have forced JSW Steel, a major customer of NMDC, to import the raw material. Essar Steel also buys large quantity of iron ore from NMDC.

The price cut, which might be followed by other miners, would benefit domestic steel firms which are now in a precarious situation now with rising imports from China, Japan and Korea. The price cut could help them to better their margins.

The demand for iron ore has also come down in line with the fall in steel production. NMDC’s sales in October actually fell from the previous month even as its sales in first seven months of current fiscal rose to 17.65 million tonnes against 16.03 MT during the corresponding period last year.

Domestic crude steel production also declined by 0.5 per cent in October, 2014 from the immediate past month, mainly by a decline of 0.9 per cent in production by major producers and a 0.1 per cent decline in production by non-major producers.

The price cut might impact NMDC’s net sales realisation a little during the current quarter, although it is confident of imporving the bottom-line for the entire fiscal.

NMDC had clocked Rs. 6,420 crore net profit in the 2013-14 fiscal. In the first two quarters of the current fiscal, it has reported Rs. 3,482 crore. The company also hopes to improve its sales volume to around 32 million tonnes for the current fiscal.

Miners ‘Covering Their Eyes’ on China’s Commodity Cliff

By David Stringer  Dec 1, 2014
Bloomberg
After spending $1 trillion since 2002 on projects to feed China’s commodity boom, the world’s mining companies have a lot riding on their biggest customer.

While commodities may be trading at five-year lows, the heads of three top miners BHP Billiton Ltd. (BHP), Vale SA (VALE3) and Rio Tinto Group (RIO) last week all backed China, the world’s second-biggest economy, to keep buying increasing amounts of their products deep into the next decade. Not everyone agrees.

“The commodity guys are just too optimistic,” Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong, said in an interview, without referring to particular companies.

As China moves to a consumer-led from an investment-led economy, there may be a substantial absolute drop in commodities demand, not just slower growth, he said.

“This is happening now,” Tao said. “It’s just people are covering their eyes and refusing to believe that what is happening now is not just a cyclical story, but also a structural story.”

Goldman Sachs Group Inc. this year joined other banks in calling an end to the commodities supercycle as China slows. The biggest consumer of industrial metals and iron ore and the largest oil user after the U.S. is headed for the slowest full-year expansion since 1990.

China’s economic slowdown deepened in October as industrial output growth and fixed-asset investment trailed estimates. Australia & New Zealand Banking Group Ltd. last month cited slower-than-expected growth in China for slashing its price projections for commodities including oil, iron ore and nickel next year.

‘Supernormal’ Demand

China’s “supernormal” commodities’ demand since 2002 will return to normal as the economy matures, according to a Goldman Sachs report in October. The bank expects China to take only its share of global GDP - about 13 percent in 2013 - in mining sector demand, down from as much as 60 percent at the peak of the boom. The trajectory of Chinese demand over the next 10-15 years will continue to call the tune, it said.

“China’s metal consumption per unit of GDP peaked in 2011-2012, indicating infrastructure investment’s contribution to the economy has started to shrink,” said Ma Kai, a Beijing-based analyst with China International Capital Corp.

“We won’t argue against the view that China’s total consumption would peak in 2020s, but the growth is slowing.”

Record Level

BHP, the world’s biggest miner, is adamant China will continue to underpin demand. According to BHP, the nation will retain its rising appetite for iron ore until at least the early to mid-2020s, remain the most important driver of copper demand and together with India account for growth in energy consumption by 2030 equivalent to current demand from the U.S.

“Chinese demand for iron ore and steel increased this year again to another record level,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said by phone. “The underlying demand story here is constructive.”

About 250 million more people may move from rural areas to cities in China by 2030, bolstering demand for metals to meat, BHP told investors at a Sydney seminar last week.

“We have been fairly strong that the urbanization of China will continue, that it will move from a more investment led-economy to a consumption-led economy,” Chief Executive Officer Andrew Mackenzie said in a Nov. 24 interview.

BHP fell 5.3 percent to A$29.27 in Sydney trading, to the lowest since March 9, 2009. Rio declined 4.1 percent and Fortescue Metals Group Ltd. (FMG), the fourth-largest iron-ore producer, plunged 11 percent to A$2.62, the lowest since May 29, 2009.

China’s Desire

While that transition may be complicated by China’s desire to address climate concerns and improve the performance of its banks, “we take a long term view, and we think it’s steady as she goes,” Mackenzie said.

Rio, the second-largest mining company, will also stand firm on its strategy of raising iron ore output, Chief Executive Officer Sam Walsh said last week in an interview. “It’s important we stick to our game plan,” Walsh said.

London-based Rio doesn’t see China’s steel production peaking until about 2030, an outlook shared by Wood Mackenzie Ltd., while Wolfgang Eder, chairman of the World Steel Association, expects output the nation’s output to reach its zenith in as little as three years. Rio also said last week that it doesn’t see Chinese per-capita electricity usage reaching levels close to Europe and Japan until 2030.

Continued Chinese iron ore demand means Vale, the biggest supplier, also won’t slow expansions, Chief Executive Officer Murilo Ferreira said Nov. 26 in an interview, insisting prices will rise from current lows as higher cost mines shutter.

Declining Prices

If higher “volume doesn’t come from our business, it’s going to come from other businesses,” Jimmy Wilson, BHP’s president of iron ore, said in an interview broadcast yesterday by Australia’s Nine Network.

There are signs the immediate outlook for China’s economy is clouding. It’s forecast to expand 7.4 percent in 2014 and shrink to 7 percent in 2015, according to a Bloomberg survey of economists. Last month, the central bank announced its first reductions in benchmark interest rates since 2012 to counter the slowest economic growth in 24 years.

The World Bank forecast this year that metals’ prices were set to decline more than 6 percent, following last year’s 5.5. percent drop, on new supplies and weaker Chinese demand. A Bloomberg Commodity Index (BCOM) of 22 raw materials fell Nov. 28 to its lowest since July 2009, headed for a fourth annual decline, the longest slump since at least 1991.

‘The China factor for the commodity super cycle is over,’’ said Credit Suisse’s Tao. “If housing, infrastructure are no longer the main drivers of the Chinese economy, I think Chinese demand for commodities is going to shrink.”

Iron-Ore Miners to Drive Exports as Prices Fall, BHP Says

By Adam Haigh  Nov 30, 2014
Bloomberg
BHP Billiton Ltd. (BHP), the world’s biggest mining company, signaled there will be no slowdown in the drive by global iron-ore producers to boost production even as prices slump.

“Even the iron-ore price where it is today can induce more volume,” Jimmy Wilson, BHP’s president of iron ore, said in an interview broadcast yesterday by Australia’s Nine Network. “If that volume doesn’t come from our business, it’s going to come from other businesses around the world and other countries around the world.”

Iron ore has plummeted 47 percent this year to near the lowest since 2009 as investment in new mines deepens a global glut. BHP, Rio Tinto Group (RIO) and Vale SA have expanded output in Australia and Brazil, betting the increase will offset falling prices and force high-cost mines worldwide to close.

“Organizations have to be competitive and those that can’t be competitive will end up going out of business,” said Wilson.

BHP operates in the iron-rich Pilbara region of Western Australia, the largest production hub for the material in the world. It’s the No. 3 exporter and is spending $2 billion to boost annual production capacity to 290 million metric tons. Iron ore contributes 32 percent of its sales.

Induce Supply

“When the prices have been so high over such a long period of time you are going to induce more supply and when that supply comes on, we shouldn’t be awfully surprised,” said Wilson. “This is the commodity cycle.”

The market is in the midst of a transition without precedent in recent commodity history as supply surges and some higher-cost mines are displaced, according to Macquarie Group Ltd. As much as 130 million tons of seaborne production capacity, or about 10 percent of current supply, will have to shut in 2015-2016, Goldman Sachs Group Inc. said in a report.

While low-cost producers such as BHP, Rio and Vale have more tolerance to absorb lower prices in the near term than Cliffs Natural Resources Inc., Fortescue Metals Group Ltd. and Atlas Iron Ltd., the compression of earnings and cash flow is nonetheless value destructive, Moody’s Investors Service said in an October report.

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JSW Steel in talks to buy Bhushan Steel’s Odisha unit and Orissa Sponge

By Nisha Poddar, ET Now | 1 Dec, 2014
Sources suggest that Sajjan Jindal's JSW Steel is eyeing two big M&A deals, the company is in talks to buy Bhushan Steel's Odisha steel unit and is also looking at buying out promoters' stake in Bhushan invested company, Orissa Spong. Total enterprise value for the deal is being worked out at Rs 30,000 crores, a source said.

Bhushan Steel has a total debt of around Rs 35,000 crores on its books and has been asked by the lenders to sell its Odisha unit which is an integrated steel plant with a capacity of 5.6 million tonnes. Promoters of Bhushan Steel have been trying to find ways of bringing down the debt levels but may not be convinced about selling the Odisha unit.

Bhushan Group's energy arm has about 15% stake in Orissa Sponge in which Monnet Ispat holds 41% stake. Orissa Sponge had been in the middle of a takeover battle due to its iron ore and coal mine reserves, this is also the reason for JSW Steel's interest in buying the company. This deal will take the total steel making capacity of JSW Steel close to 20 million tonnes which is the largest by any domestic steel company in the Indian market.

Bhushan Steel's spokesperson denied any such development which JSW Steel's spokesperson said, "We do not comment of market speculation."

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