Chinese iron ore miners face cheaper imports
May-08-2014 By : agxadmin
Surging global supplies of seaborne iron ore are expected to force some higher-cost Chinese miners to close, according to BHP Billiton. Low-cost output by miners in Brazil and Australia will displace marginal suppliers in China, Michiel Hovers, Vice President of iron ore marketing at BHP, told an industry conference. Vale, the world’s biggest iron ore producer, plans to raise output by almost 50% by 2018, Claudio Alves, Director of Marketing and Sales, told the gathering in Singapore. The biggest producers, including Vale, BHP, Rio Tinto Group and Fortescue Metals Group, have invested billions of dollars to expand output, betting on sustained growth in demand from China, the biggest buyer. Iron ore fell into a bear market in March amid forecasts of a global glut. Fortescue wouldn’t cut output even if prices extend declines as its costs are low, Zhuang Binjun, Business Development Manager, said. Ore with 62% content delivered to Tianjin has fallen 21% so far this year to USD106 a ton, according to data from The Steel Index. The benchmark fell to USD104.70 on March 10, the lowest level since 2012. While prices may be firmer over three months, there may be a drop below USD100 over six months, toward USD90, on the new supplies, Kamal Naqvi, global head of metals at Credit Suisse Group, told the conference. If prices drop to USD100, output in China may be hurt as domestic mines with high production costs are forced to cut output or close, according to the Bureau of Resources and Energy Economics, Australia’s government forecaster. By comparison, Rio Tinto can be profitable above USD36 and BHP’s break-even is USD38. Global seaborne supplies will increase 126 million tons to 1.38 billion tons this year, Morgan Stanley estimated in a May 5 report. That will increase the worldwide surplus to 79 million tons in 2014 from 1 million last year, the China Daily reports.
U.S. accuses China of subsidizing hi-tech steel exports
Apr-03-2014 By : agxadmin
The United States has accused China of unfairly subsidizing exports of hi-tech steel. The U.S. Department of Commerce estimated that the subsidy rate on imported grain-oriented electrical steel from Baoshan Iron & Steel Co and other Chinese exporters was 49.15%. General Manager He Wenbo said sales of the steel category accounted for 11% of total sales. Annual output of the speciality steel would reach 300,000 tons. According to the website of Baosteel’s rival, the Wuhan Iron and Steel Group produced 400,000 tons of the speciality metal in 2012. In January, the United States complained to the World Trade Organization (WTO) that China used tariffs to effectively block imports of U.S. steel despite a WTO ruling in the United States’ favor. The steel is used in the cores of high-efficiency transformers, electric motors and generators. In 2013, imports of grain-oriented electrical steel from China were valued at an estimated USD5.4 million. The complaint was lodged by AK Steel and Allegheny Technologies. The U.S. Commerce Department and the International Trade Commission (ITC) have yet to issue final rulings in the case.
Steel sector fights pollution and blind investment
By : agxadmin
China’s steel sector is burdened by massive overcapacity, razor-thin profit margins, even for the best performing operators, and a mountain of bad debt. The steel sector is also one of the single biggest contributors to air pollution that now regularly plagues Beijing and other Chinese cities. It therefore represents a prime battleground both in Beijing’s new “war on pollution” and the long-running war on blind investment. When the central government says it is targeting fixed-asset investment (FAI) growth of 17.5% this year, the slowest rate in 12 years, it cuts to the very heart of what has been the core driver of China’s steel expansion story. “You can basically say that Chinese steel output has reached a peak,” said Zhang Wuzong, Chairman of private steelmaker Shandong Shiheng Special Steel. But the official forecast is for the country’s steel production still to grow this year, albeit at a slower rate of around 3% compared with 7.5% last year. However, even the China Iron and Steel Association (CISA) is now starting to warn that national output will peak around 850 million tons. The country is estimated to have some 300 million tons of surplus capacity – perhaps more – almost twice the output of the European Union last year. Zhang Qingwei, Governor of Hebei province, home to 250 million tons of Chinese steel capacity and seven of the 10 most polluted cities, has threatened to sack any official responsible for even a ton of extra steel capacity this year. Hebei has agreed to cut production capacity by 15 million tons this year and by 86 million tons by 2020. The war will only intensify after Premier Li Keqiang’s warning that the smog in Beijing is “nature’s red-light warning against inefficient and blind development”, the South China Morning Post reports.
Hong Kong Ex to launch metal trading platform
By : agxadmin
Hong Kong Exchanges and Clearing (HKEx) plans to introduce the Hong Kong version of the London Metal Exchange (LME) platform this year to launch the local commodities market. “HKEx is expected to face a lot of challenges in promoting this new market as many local brokers and investors do not have sufficient knowledge about metal trading. The bourse will need to provide a lot of education and promotion in the following months before the launch,” warned Christopher Cheung, Legislator for the financial services sector. The bourse has not yet announced what products will be traded on the platform, but HKEx Chief Executive Charles Li said they would be settled by cash and all local futures brokers could trade on it with no need to apply for membership of the LME. It will also negotiate with exchanges on the mainland for possible cross-selling of each other’s products. HKEx reported a disappointing 11% profit rise last year, partly as a result of the costs related to the LME acquisition. Jeffrey Chan, Chairman of the Hong Kong Securities Association, said it was a wise move that HKEx now planned to allow all 180 futures brokers in Hong Kong to trade on the LME instead of requiring them to apply for membership. However, Hong Kong investors are not very enthusiastic about commodities trading. HKEx already has gold futures trading but turnover is nil.
MMG sets 10% floor for return on acquisitions
By : agxadmin
MMG, the overseas non-ferrous metals mining unit of state-owned China Minmetals, will consider as acquisition targets only assets and projects with at least a 10% return, even though it enjoys low financing costs thanks to its parent firm’s connections. Andrew Michelmore, Chief Executive of Hong Kong-listed MMG, said the company is mainly looking for copper and zinc mining projects that are either in production or at an advanced stage of construction. The firm mines for zinc, copper, lead, silver and gold in Australia and copper in Laos and the Democratic Republic of Congo. “We need to add shareholder value, which means we need something that gives us a return greater than our average cost of capital,” he told the South China Morning Post. MMG would likely not acquire any project smaller than the Kinsevere copper project in Congo, which it bought for USD1.36 billion in early 2012, he said. Michelmore confirmed MMG has been in talks to buy into Switzerland-based commodities trading major Glencore Xstrata’s Las Bambas copper mining project in Peru, but no binding agreement has been reached. It has formed a consortium together with Guoxin International Investment Corp and CITIC Metal Co to bid for the stake in the Las Bambas project. The sale of one of Glencore Xstrata’s major copper projects by September 30 is a condition for China’s Ministry of Commerce (MOFCOM) to approve Glencore’s merger with Xstrata, which was subject to antitrust approval by the central government. Beijing is concerned the merger would increase Glencore and Xstrata’s control over the supply of copper and hurt the interests of Chinese customers. The country has to import copper to meet some 70% of its demand, of which just over 40% is from the electricity sector. China Minmetals Vice President Li Fuli said the company is already the largest Chinese copper resource holder, controlling close to 10 million tons, of which the biggest project is in Peru. Since 2004, China Minmetals has been seeking overseas resources like copper, aluminum, iron ore, lead and zinc, for which China has to import about 70% of its demand.
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