Sun, Apr. 26, 11:59 AM| 4 Comments
Fri, Apr. 24, 5:37 PM
Fri, Apr. 24, 12:29 PM
- Vale (VALE +9.1%) continues to surge, headed for its biggest weekly gain in 16 years and gaining nearly 50% since Wednesday's announcement that it produced record-high levels of iron ore, nickel and other commodities during Q1.
- Also on Wednesday, BHP Billiton (BHP +3.4%) said it was curbing expansion plans and supplies from higher-cost mines dropped, easing concerns over a global glut and sparking iron ore biggest one-day price jump since 2012.
- "Vale is reacting to the rebound in iron ore prices,” said an equity analyst at CM Capital in Sao Paulo. “Most of Vale’s costs are fixed, so whenever there’s an increase in prices, there’s a direct impact on earnings.”
- Iron ore prices jumped 5.5% overnight to $57.81/dry ton and have rallied 23% since bottoming out at $47.08 on April 2.
- Also: RIO +1.6%, CLF +3.7%.
Wed, Apr. 22, 10:43 AM
- Vale (VALE +7.4%) says it produced 74.5M metric tons of iron ore during Q1, up 4.9% Y/Y and a company record for the period, as it increased output despite weak prices.
- Vale's total was aided by the N4WS mine in the Carajás complex in the Brazilian Amazon which began operating in December and contributed to an 18% rise in Carajás production during the quarter.
- Output of iron ore pellets, which sells at higher prices, rose 15% to 11.4M tons.
- Vale also produced a Q1 record 69.2K metric tons of nickel, up 2.5% Y/Y, while copper production surged 21% to a record 107.2K tons, adding by the ramp-up of the Salobo mine in northern Brazil; coal output fell 5.1% to 1.7M metric tons.
Wed, Apr. 22, 10:11 AM
- Iron ore prices enjoy their biggest one-day jump since October 2012, rising 5.9% to more than $54/metric ton - still not far above 10-year lows - after BHP Billiton (BHP +2%) announced it is slowing the pace of its expansion program.
- BHP says it is deferring a planned $600M project to reduce bottlenecks at Australia’s Port Hedland, the world’s biggest bulk export terminal, causing it to miss its target of raising production to 290M tons/year by mid-2017.
- Analysts say the decision will lower BHP's capex profile over the next few years to preserve free cash flow to support the dividend and balance sheet, and could deflect some of the negative public commentary about surplus supply.
- The postponement is similar to Rio Tinto’s (RIO +2.2%) deferral last year of an investment decision on the $1B Silvergrass mine until 2016.
- Also: VALE +7%, CLF +0.6%.
Thu, Apr. 16, 7:55 AM
- The iron ore industry is “facing an existential challenge,” Goldman Sachs says as it lowers its iron ore forecast and now sees the price falling to average $52/metric ton this year, $44 in 2016, and $40 in 2017 and 2018.
- First-tier producers will remain profitable although their margins will be squeezed, but as much as half of tier 2 production capacity is at risk, the firm says; tier 1 consists of BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO) and Vale (NYSE:VALE).
- That's not a vote of confidence in the big miners who show no signs of slowing production amid weakening demand, which has sent iron ore prices below $50 this month.
- Goldman cuts Rio and Fortescue Metals (OTCPK:FSUMF) to Sell, and Rio will need to utilize its balance sheet to pay dividends, while shares are expensive at 20x 2016 estimated earnings relative to history, the firm says; BHP is downgraded but only to Neutral, as it is the least exposed to iron ore among the big miners.
- Several others - including J.P. Morgan, UBS and Citigroup - cut their iron ore price estimates earlier this month.
Wed, Apr. 15, 10:58 AM
- Australia’s Treasurer Joe Hockey plans to discuss iron ore demand with his Chinese counterpart after rising output from Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP) helped drive the metal’s price below $50/metric ton this month.
- "When you have an iron ore price that has dropped as dramatically as it has in the last 12-18 months, we’ve got to build shock absorbers into our system to cope with it,” Hockey says.
- China, which buys about two-thirds of all iron ore transported by sea, grew last year at the weakest pace since 1990 and likely will slow further in 2015, and the country’s consumption of iron ore probably will remain weak as steel demand contracts.
- RIO plans output of 330M tons this year from 295M in 2014, while BHP targets 225M tons this year from 204M; Vale (NYSE:VALE), the world's leading iron ore producer, expects to produce 340M tons this year.
Tue, Apr. 14, 7:58 AM
- S&P places some of the world's biggest iron ore miners on credit watch negative, as it lowers its iron ore price forecasts to $45/metric ton for the rest of this year, $50 for next year and $55 for 2017; the previous forecasts were $65 for this year and 2016, and $70 for 2017.
- The eight iron ore producers being watched by S&P include global giants BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), Vale (NYSE:VALE), Fortescue Metals (OTCPK:FSUMF) and Anglo American (OTCPK:AAUKF, OTCPK:AAUKY).
- "The revision of our price assumptions and the sharp fall of iron ore spot prices reflect the severe supply and demand imbalance in the market, which we believe could persist for the next two years," S&P says.
Thu, Apr. 2, 5:24 PM
- Iron ore prices plunged below $50/ton this week with no sign of stopping, as the biggest miners are bent on ramping up supply even though demand, particularly from China, appears to be falling short.
- WSJ says the situation raises questions about the survival of the fittest strategy followed by the big three producers - BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO) and Vale (NYSE:VALE) - which have continued to boost production with the goal of squeezing out weaker operations that produce iron ore at a higher cost.
- The strategy is playing out somewhat, but it is not without risk; a $5 dip in iron ore prices would shave $672M in earnings from BHP and $674M from Rio, according to estimates by Liberum Capital.
- In Australia, where iron ore mining is a major driver of the economy, the selloff in iron ore has raised pressure for an interest rate cut by the country's central bank as soon as next week.
Wed, Apr. 1, 2:25 PM
- Petrobras (PBR +7%) and other Brazilian stocks post strong gains in reaction to Pres. Rousseff's declaration that her government will do whatever it takes for the country to meet its fiscal target this year.
- Rousseff says PBR may release its audited results by the end of the month, and issues a strong denial that she knew about the bribery that has shaken the company she chaired during 2003-10.
- Also: PBR.A +6.5%, EBR +6.6% EBR.B +9%, ELP +6%, CIG +4.9%, CPL +3%, SBS +4.9%, BSBR +5%, BBD +4.5%, ITUB +3.9%; however, with continued negative headlines on iron ore prices, VALE -1.9%.
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
Wed, Apr. 1, 10:49 AM
- Petrobras (PBR +6%) board member Silvio Sinedino points to potential conflicts of interest on the company's next board, citing the nomination of Vale (NYSE:VALE) CEO Murilo Ferreira as chairman and the selection of the president of Brazil's BNDES development bank, Luciano Coutinho, as interim chairman.
- Vale is Brazil's largest diesel consumer and pays PBR ~1B reais/year ($300M) to fuel its mines and railways, while PBR buys raw materials from Vale for its fertilizer plants.
- Sinedino, who represents PBR workers' interests on the board and is one of three members not appointed by the government, also says PBR will not sell its fuel distribution unit as part of its ongoing $13.7B asset sale plan.
Fri, Mar. 27, 6:28 PM
- Vale (NYSE:VALE) should consider selling as much as a 20% stake in its crown jewels - the Northern System operations, which includes Carajas, the world's largest iron ore mine - to "regain control of its destiny" amid the huge drop in iron ore prices, says Deutsche Bank analyst Wilfredo Ortiz.
- Vale's balance sheet is "precarious," Ortiz says in estimating the miner's funding gap could climb to $10B under a distressed pricing scenario for iron ore of $45/ton through the end of 2017.
- The analyst estimates selling a 15%-20% stake in Carajas could fetch $8B-$10B, which would be enough to cover most of the outstanding capital investment for the mine's expansion and would shore up Vale's balance sheet "to weather pretty much any storm in the iron ore market."
Thu, Mar. 26, 3:34 PM
- Rio Tinto (RIO -1.2%) CEO Sam Walsh rejects as “hare brained” a request by a rival miner for the industry to stop the slide in iron ore prices by collectively capping output.
- Mining execs say any attempt to agree a cap on production would leave companies exposed to lawsuits and fines for anti-competitive pricing in multiple jurisdictions, as well as complaints and potential litigation from customers.
- The arguments show the extent to which miners have been hurt by the drop in prices, although the largest producers such as BHP, Vale (NYSE:VALE) and Rio, continue to insist they can withstand the slump.
- Andrew Forrest, CEO of Fortescue Metals (OTCPK:FSUMF) - the world's no. 4 iron ore supplier which earlier this month pulled out of a proposed debt refinancing because of unfavorable market conditions - suggested this week that a production cap by the big iron ore miners would help prices.
Wed, Mar. 25, 5:33 PM
- Vale (NYSE:VALE) is looking to raise cash but may find it easier to dispose of giant ships and part of its stake in a rail logistics business before selling mining assets, Reuters reports, citing four sources with knowledge of the situation.
- With several cash-raising options discussed earlier now looking more problematic as the risk associated with both Brazil and mining-related investments continues to mount, selling a group of Valemax ore carriers and disposing of all or part of a 43.8% stake in rail freight firm MRS Logística are said to have become the best options for Vale.
- Vale has to fill a $1.4B cash flow shortage this year, according to analyst estimates.
Tue, Mar. 24, 2:24 PM
- Nearly 60% of Brazilians favor impeaching Pres. Rousseff, and nearly 70% believe she is responsible for the alleged kickback scheme at Petrobras (PBR +0.5%), according to a poll released yesterday.
- In the U.S., a 40% approval rating is considered dangerously low; in Brazil today, Rousseff's approval is at 10.8%, highlighting the potential for impeachment.
- Among other Brazilian companies today: VALE -3.9%, GGB -2.9%, ITUB -0.3%, OIBR -3%, SBS -3%, FBR +0.4%, GFA +3.3%.
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
Wed, Mar. 18, 2:57 PM
- Fortescue Metals (OTCPK:FSUMF -7.2%) earlier today pulled a proposed $2.5B debt sale, highlighting an iron ore market in deepening distress as prices closed at six-year lows.
- "Rather than lowering the interest cost, we understand the funding cost for the proposed $2.5B secured note was likely to be 8.5%-9%; hence why the offering was pulled," according to Citigroup analysts.
- Fortescue, the world's fourth largest iron ore miner, made the decision to pull the bond issue as iron ore prices fell by 5% to US$54.50/ton, driven down by a rapid expansion in supply by the miner as well as rivals BHP Billiton (BHP +1.2%), Rio Tinto (RIO -0.2%) and Vale (VALE -0.6%); stock prices had been much lower before today's Fed announcement.
- Analysts expect iron ore prices to fall even further as BHP and Rio press ahead with mine expansions in coming years and China’s economic growth slows.
- Also: CLF -3.9%.
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