Fri, May. 1, 5:49 PM
- Wolfe Research analyst Gordon Johnson says he remains negative on Cliffs Natural Resources (NYSE:CLF), underpinned by his views on structural iron ore excesses, but at least he came away from a meeting with CEO Lourenco Goncalves with "a better appreciation for the bull case."
- Johnson says the CEO admitted the opportunity to sell iron ore pellets to U.S. mini-mills is small now at ~500K tons over the next 12 months, but CLF sees big potential for what would be an entirely new market for the company; CLF pegs the longer-term potential at 5M-10M tons, and says its existing capacity is sufficient to meet an incremental 500K tons.
- Both the analyst and the company suspect CLF's stock price rise yesterday was a result of misunderstanding Vale's (NYSE:VALE) comments from its earnings conference call; Vale is not likely to consider a cut to its planned ramp to 450M metric tons/year until iron ore prices move statically below $41/ton.
Thu, Apr. 30, 4:45 PM
- Vale (NYSE:VALE) says it is delaying the timeline of a possible IPO of its base metals division after an expected rebound in nickel prices failed to materialize.
- Vale had said in December it was considering selling 30%-40% of the division around August, but CEO Murilo Ferreira now says the new goal is to be ready to present a recommendation to Vale’s board by the end of this year for possible action in 2016.
- Vale execs had been expecting nickel prices to rise to ~$21K/metric ton but the company instead sold its nickel for an average $14,279 in Q1, citing a slowdown in Chinese housing construction and bearish sentiment regarding Chinese economic growth.
- Earlier: Vale posts third straight quarterly loss but may cut iron ore output
Thu, Apr. 30, 1:17 PM
- Vale (VALE -0.9%) is lower after posting a Q1 loss - its third straight quarterly loss, and a wider loss than in Q3 and Q4 - under pressure from falling iron ore prices.
- As well as weaker iron ore prices, Vale says the depreciation of the Brazilian real against the dollar had cost it $3B in the quarter.
- But shares are well off earlier lows after Vale's Head of Ferrous Peter Poppinga told investors during a conference call that the company may cut its iron ore production forecast by up to 30M metric tons over the next two years.
- Poppinga says Vale could replace some old higher-cost iron ore production as new capacity comes on stream: "If the market demands, we are prepared to reduce production from the south and southeast system," he said, referring to the company's Minas Gerais mines.
- The exec said Vale's iron ore production forecast for 2015 would remain at 340M metric tones, but he did not specify whether adjustments could be made to the forecast for next year and beyond.
Thu, Apr. 30, 9:37 AM
Wed, Apr. 29, 11:11 PM
- The recent rally in iron ore prices is built on shaky foundations, as today's 4.6% drop emphasizes, writes Heard on the Street's Liam Denning.
- Optimism had sprung in part from a 5% jump in Chinese crude steel production in the first 10 days of April, but Denning says structural headwinds - China’s desire to pivot away from fixed-asset investment and its need to deal with bad debt - remain.
- Bulls also have cited BHP Billiton's (NYSE:BHP) plans to scale back iron ore capacity expansion plans in Australia, but Caroline Bain at Capital Economics says a cut to potential supply of just 20M metric tons does not amount to much; also, BHP and Rio Tinto (NYSE:RIO) are expected to raise output heading into their June fiscal year-ends.
- Also worth noting is that while Cliffs Natural Resources (NYSE:CLF) reported positive Q1 earnings, free cash flow was negative despite an 85% cut in capital spending; in its earnings conference call, CLF spoke almost wistfully of the need for BHP, Rio and Vale (NYSE:VALE) to curb expansion to rebalance the market.
Wed, Apr. 29, 7:52 AM
- Vale (NYSE:VALE) is in talks with Chinese shipbuilders and leasing companies to build ~50 giant Valemax bulk carriers that would move iron ore from Brazil to China, WSJ reports.
- Brokers in Singapore say the potential order is aggressive given the soft markets in both iron ore and bulk shipping in general; the Baltic Dry Index has been hovering near 30-year lows since the beginning of the year on weaker imports of coal and iron ore from China.
- If confirmed, the order would be the largest in history for such ships.
- VALE -3.1% premarket.
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
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