Iron ore miners out of favour
Investor sentiment towards iron ore miners was also wary, thanks to concerns about the change of economic gears in China, shifting away from over-reliance on exports to focusing more on domestic demand.
The spot iron ore price is trading at about $US120 ($125) a tonne, the lowest seen since last October, but still holding well above 2012 lows of below $US90 a tonne.
Among the big iron ore miners, Fortescue shares fell 18¢ to close at $3.35, its lowest since last September, when the iron ore price was in retreat. Atlas was down 5¢ at 77¢, Rio shed 74¢ to $53.96 and BHP lost 41¢ to $34.46.
China's iron ore stockpiles are estimated at 75 million tonnes, significantly below the level of August last year, about 100 million tonnes, which may prevent the iron ore price from falling harder in the second half of the year.
The decline in the iron ore price is potentially good news for local steel producers such as BlueScope Steel, which is working as well to limit the impact of high iron ore prices on earnings.
BlueScope is ramping up export volumes of iron sands, for example, to help offset overly strong iron ore prices on its bottom line. It is doubling iron sands exports to 1.7 million tonnes, which coupled with using some of the product at its Port Kembla steelworks, will help to lift overall iron ore sales to 2.7 million tonnes annually.
The company operates its own iron sands mine in New Zealand, with part of the output used at its local steelworks. The boost to exports will give BlueScope a 55 per cent "hedge" against iron ore prices, it said.
Additionally, BlueScope is still boosting exports of coke, following the closure of one of the two blast furnaces at Port Kembla, which has left it with surplus production capacity. It now devotes one of its coke ovens solely to service export markets.
From coke export volumes of 172,000 tonnes in fiscal 2011, this rose to 516,000 tonnes in the next financial year, in the wake of the closure of one of the two blast furnaces at Port Kembla.
It rose further, to 360,000 tonnes in the December half alone, which has lifted it to an annualised rate of 720,000 tonnes.
To help boost coke exports further, it has reconfigured some of its port capacity.
BlueScope is believed to be selling a large part of its coke to international trader Noble Corp.
Frequently Asked Questions about this Article…
Share prices fell after a renewed slide in the iron ore price and growing wariness about near‑term Chinese steel output. Investor sentiment was also affected by China shifting its economic focus away from exports toward domestic demand. For everyday investors, this means mining stocks can be volatile when commodity prices and demand outlooks change.
The article reports the spot iron ore price trading around US$120 (about A$125) a tonne — the lowest level since last October but still well above the 2012 lows when prices were below US$90 a tonne.
According to the article, Fortescue shares fell 18¢ to close at $3.35 (its lowest since last September), Atlas dropped 5¢ to 77¢, Rio Tinto lost 74¢ to $53.96, and BHP fell 41¢ to $34.46.
China’s stockpiles were estimated at about 75 million tonnes versus roughly 100 million tonnes in August last year. Lower stockpiles may help prevent the iron ore price from falling much further in the second half of the year, because reduced inventories can support demand for fresh shipments.
Yes. The article notes that a decline in iron ore prices can help local steelmakers such as BlueScope by easing the cost pressure on their earnings, since iron ore is a major input for steel production.
BlueScope is increasing and reallocating production: it is doubling iron sands exports to 1.7 million tonnes and using some of that product at its Port Kembla steelworks to lift overall iron ore sales to 2.7 million tonnes annually. The company says this gives it a roughly 55% hedge against iron ore prices.
Following the closure of one of two blast furnaces at Port Kembla, BlueScope had surplus coke production capacity and has reconfigured port capacity to export more. Coke exports rose from 172,000 tonnes in fiscal 2011 to 516,000 tonnes the next year, and reached 360,000 tonnes in the December half alone (an annualised rate of about 720,000 tonnes).
The article says BlueScope is believed to be selling a large part of its coke exports to the international trader Noble Corp.
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