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 the near-term outlook for Chinese steel output. Investors are also cautious because China appears to be shifting from export-led growth toward more domestic demand, which can curb iron ore demand.
The spot iron ore price was trading at about US$120 a tonne (roughly A$125), the lowest level since last October but still well above the 2012 lows when prices fell below US$90 a tonne.
Among the big miners mentioned, Fortescue fell 18¢ to close at $3.35, Atlas was down 5¢ to 77¢, Rio Tinto shed 74¢ to $53.96, and BHP lost 41¢ to $34.46.
China's stockpiles are estimated at about 75 million tonnes, down from roughly 100 million tonnes last August. Lower stockpiles can help limit further sharp falls in the iron ore price in the second half of the year by supporting demand relative to supply.
Potentially yes. Falling iron ore prices can ease input costs for steelmakers. BlueScope is positioning itself to limit the impact of iron ore price swings by increasing its own iron sands output and exports and boosting coke exports.
BlueScope is doubling iron sands exports to 1.7 million tonnes and using some of that product at its Port Kembla steelworks, lifting total iron ore sales to about 2.7 million tonnes annually. The company says this gives it roughly a 55% hedge against iron ore price movements.
After closing one of two blast furnaces at Port Kembla, BlueScope increased coke exports from 172,000 tonnes in fiscal 2011 to 516,000 tonnes the following year. In the December half alone it exported 360,000 tonnes, an annualised rate of about 720,000 tonnes.
Watch iron ore price trends, Chinese steel output and stockpile levels, and company strategies such as export volumes and hedges (for example BlueScope's iron sands and coke exports). These factors help explain investor sentiment and near-term earnings pressure on miners and steelmakers.
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