Good points, Eric. I appreciate your suggestion that we are wise to look beyond the headlines.
Yes, the iron market seems in flux right now, or perhaps in dangerous straights - depending on the vagaries of economic winds, and one's sense of confidence or fear. So, here are two very recent and differing? views.
"BMO says tight supplies forge a bright future for iron ore"
mineweb.com
"Brazilian analysts cut next year's iron ore price predictions impacting Vale"
mineweb.com
Of course, what may be biased observations here are in regards to whether or not prices will rise by 10 percent, or 20-30 percent next year.
Also, Vale has stopped shipments to China over China's recent refusal to accept a price hike inside of the present annual contract. Vale later said, in so many words, that they made a mistake, they really meant the requested/demanded hike for next year, but they still halted shipments over the refusal, and without being asked to do so. ...their version of economic blackmail?
Further, and I could just be deluded here, but some of the DD I've produced shows that marginal steel producers in China have closed, or are closing from the triple whammy of higher energy costs, higher ore prices, AND the declining quality of ore from domestic and Indian sources. Consequently, overall production of steel is down, and stockpiles of ore are building. Makes sense, no?
As one of the articles shown above indicates, quality ore is still in demand. Given damages to the broader world markets in recent days, the question becomes, can prices for quality iron ore hold up into the next contract year, and if not by how much will they be hurt?
Geez, even if the majors are forced to accept price cuts next year of, say, 30 percent, that still leaves iron at historically high prices, much higher even than they were just last year - 2 annual contracts ago. At this point, I don't see prices too much lower than that, if at all, but maybe that's just my childish optimism.
The requested halt in shipments you referred to was from but one steel producer to one ore supplier, not a major. And it was only for the 2nd quarter of next year. Is this one of those marginal steel producers? Or maybe there is some news you've seen that I haven't?
Personally, I will wait until there are further examples of these requests for shipping halts (and in regards to major suppliers and major Chinese steel producers), before I acknowledge the end of the iron market.
As to the closing of the Olympics having a dampening effect on iron prices, there may be something to that, but that should be more than offset by all the building presently underway for Shanghai's Expo 2010, the largest most costly world's fair in history. It should dwarf the spending required to produce the Olympics.
In any event, and despite big sounding negatives for iron, I still think Chinese miners/steel producers would like to lock-up overseas sources of quality product, and that Rio, BHP and especially Vale - in regards to South America - would like to prevent them from doing so (by taking these properties off the market, if nothing else). Then, too, we are looking at product that may not come to market until conditions are much better than at the moment.
BTW, Shougang Hierro is already up the road from Pampa de Pongo (PdP) at the Marcona Iron Mine, and they have been sniffing properties in Chile. Doubtless, they are also among those who have signed confidentiality agreements on PdP
As the sage said, or was that you?, time will tell.
minesandcommunities.org - FWIW |
