Iron ore prices briefly dipped below US$100\/t last week as weak steel fundamentals bite in China
\nBHP\u2019s new CFO Vandita Pant says African iron ore could disturb a balanced market between supply and demand
\nBut the world\u2019s biggest miner is bullish on the tailwinds for met coal from India\u2019s rise<\/p>\n
Iron ore miners are focusing on costs as a miracle run that shocked market watchers fades and prices threaten to dip below US$100\/t.<\/p>\n
Majors also have one eye on rising supply from Africa as the continent\u2019s first world class discovery Simandou moves steadily towards production under a consortium led by Rio Tinto (ASX:RIO)<\/a> and Chinese steel giant Baowu.<\/p>\n In her introduction to BHP (ASX:BHP)<\/a> shareholders this week, the new CFO of the world\u2019s biggest miner Vandita Pant pointed to the risks to market balance posed by the development of Simandou.<\/p>\n Analysts think it could bring around 120Mt of additional iron ore supply into the market by the latter stages of the 2020s, most of it at a premium grade beyond 65% Fe that \u2014 unlike Pilbara ores \u2014 is attractive to low emissions steelmakers.<\/p>\n The added competition has the former chief commercial officer, who marketed BHP\u2019s iron ore, coal and other products directly to Asian customers out of Singapore, cautious about the future of the market.<\/p>\n BHP has recently placed a price band of around US$80-100\/t as the support level for margins, with any iron ore produced at costs above that viewed as \u2018swing supply\u2019.<\/p>\n But for the fourth year in a row BHP has been the world\u2019s lowest cost iron ore producer, with its outlay coming in at US$15.98\/t in the December half on a C1 basis (mining and processing costs without sustaining capital, royalties, marketing or freight).<\/p>\n \u201cThis year, we continue to see that the demand of iron ore from a demand-supply perspective will be balanced,\u201d she said.<\/p>\n \u201cHowever, in the long term we do see more supply coming in and this is not a surprise. For a very long time we have been saying that China demand is now in a plateau phase and African supply will come in later this decade. <\/p>\n \u201cAnd that\u2019s why it\u2019s so important that (in a) commodity market which is going to become more competitive, we are very well positioned for that. And how do we get well positioned for it? <\/p>\n \u201c(It) is by being really good at on our operations, as well as in our cost position \u2026 we are for the fourth year in a row, the lowest cost producer of iron ore globally.\u201d<\/p>\n \u00a0<\/p>\n Iron ore started 2024 at over US$140\/t, levels some commentators viewed as unsustainable given the parlous state of China\u2019s property sector.<\/p>\n But fundamentals had been positive as well, with high export steel demand and low iron ore port stockpiles suggesting property drivers were being replaced by demand from infrastructure, renewables and manufacturing of automobiles and EVs.<\/p>\n That\u2019s all flipped in recent weeks though, with iron ore prices falling below US$100\/t for the first time this year on Friday.<\/p>\n They recovered on Monday on better data out of China where industrial output rose 7% in January and February to its highest rate in two years and fixed asset investment rose 4.2%. Singapore 62% Fe futures were up 1.75% to US$105.75\/t yesterday.<\/p>\n But steel specific data remains bad. Property development investment fell 9% in the first two months of the year from an already low 2023 base.<\/p>\n At 3666RMB\/t (US$509\/t), Chinese rebar prices are at their lowest level in over six months according to MySteel, with rebar inventories more than doubling since January to around 3.9Mt.<\/p>\n Chinese steel prices have faltered in 2024. Pic: MySteel<\/p>\n And at 14.3Mt, trader\u2019s inventories have almost tripled after hitting a low of ~5.45Mt in mid-December.<\/p>\n The reality of it all is, as usual, a matter of debate in commodity circles.<\/p>\n China happy to play the weak demand for ironore game to result in lower #ironore<\/a> prices \u2013 so it can build its stockpiles at lower cost \u2013 it’s a classic cry-wolf\/sabre-rattle tactic that regularly applies \u2013 and the WWorld falls for it every time because they don’t understand .<\/p>\n \u2014 Keith Goode (@Eagleresa) March 19, 2024<\/a><\/p>\n\n Official figures from the Pilbara Ports Authority, which manages the ports of Port Hedland (BHP, FMG, MinRes and Roy Hill) and Dampier (Rio), showed total throughput was down 4% YoY in February, with Dampier starkly lower, though stronger than expected Brazilian supply has made up the gap.<\/p>\n \u201cAt the local government level there are also concerns about production controls, property market defaults and infrastructure funding while the economic data since the Lunar New Year has continued to be on the weak side of expectations,\u201d Westpac\u2019s Justin Smirk said in a note last week. <\/p>\n \u201cIn addition, even with the recent fall in iron ore and met coal prices, Chinese steel margins and blast furnace utilisation rates remain quite weak while iron ore inventories at Chinese ports are now at the highest level since March 2023. <\/p>\n \u201cEven with weak iron ore exports from Australia, Brazil has been more than offsetting this and thus iron ore shipments from traditional markets have started to recover and are up +3% year to date.<\/p>\n Steel production has well and truly plateaued in China. Pic: Westpac IQ<\/p>\n \u201cWhile recent trends in China remain a concern for iron ore, we expect the significant cuts in interest rates and deposit rates, plus an end to uncertainty over developers\u2019 finances, should quickly see a rebuilding of the investment pipeline with investment driven by households rather than direct Government support. <\/p>\n \u201cAs such, Chinese construction activity should pick up as we move into the second half of the year rebalancing the iron ore market.\u201d<\/p>\n \u00a0<\/p>\n While BHP has been looking into the crystal ball focused on the market, its biggest rival Rio Tinto has applied its foresight to emissions.<\/p>\n Coming in response to queries from investors and activists including a proposal from the Australasian Centre for Corporate Responsibility, the miner says it is \u201ccommitted to enhance disclosure on plans to reduce Scope 3 emissions from processing iron ore\u201d.<\/p>\n Currently 94% of the company\u2019s 578Mt of Scope 3 CO2 equivalent emissions annually come from customers processing its materials, 69% or 400Mt from iron ore alone.<\/p>\n Rio wants to be Net Zero by 2050, but its analysis of the company\u2019s targets and government commitments shows the trajectory will be closer to 2060 (unsurprising given that\u2019s China\u2019s Net Zero target date).<\/p>\n Quoth Rio\u2019s PR scribes: \u201cTo provide more information and transparency for investors and interested stakeholders on our approach to this challenge, we will enhance disclosures prior to the 2025 AGM and thereafter by providing:<\/p>\n Actual expenditure on steel decarbonisation, and forecast spend, as a range, over a three-year period The announcement was, predictably, supported by the ACCR, whose company strategy lead Naomi Hogan said the move to make its Scope 3 reduction plans more transparent would \u201chelp ensure capital being allocated towards the best opportunities\u201d.\u2019<\/p>\n \u201cThis outcome should help Rio on its path to unlock large emissions reductions and also better assure long term value through the energy transition,\u201d she said.<\/p>\n \u201cThese disclosures will help address one of the key barriers to decarbonisation of the sector, which is a lack of detailed information around the allocation of capital specifically towards steel decarbonisation.<\/p>\n \u201cInvestors need to see and measure where companies are investing and prioritising actions towards scope 3 emissions reductions.\u201d<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em>\n<\/p>\n CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP ACS Accent Resources NL 0.006 0% -40% -25% -76% $ 2,838,763.70 ADY Admiralty Resources. 0.006 0% -14% 0% -14% $ 7,821,474.92 AKO Akora Resources 0.15 3% 11% -6% 7% $ 14,247,422.10 BCK Brockman Mining Ltd 0.024 -11% -8% -11% -8% $ 222,725,571.14 BHP BHP Group Limited 43.59 2% -4% -5% 0% $ 214,965,254,366.67 CIA Champion Iron Ltd 7.1 -4% -14% 7% -4% $ 3,642,040,718.78 CZR CZR Resources Ltd 0.24 -6% -12% 78% 30% $ 57,754,988.27 CTM Centaurus Metals Ltd 0.3 9% 3% -58% -63% $ 148,499,201.10 DRE Dreadnought Resources Ltd 0.017 -6% -15% -68% -73% $ 59,186,740.32 EFE Eastern Resources 0.0075 -6% -6% -6% -38% $ 9,314,598.46 CUF Cufe Ltd 0.013 0% -19% -13% -28% $ 13,753,348.38 FEX Fenix Resources Ltd 0.24 0% -4% 4% -2% $ 163,235,211.20 FMG Fortescue Ltd 24.54 -2% -14% 16% 15% $ 72,940,678,907.42 RHK Red Hawk Mining Ltd 0.725 14% 9% -5% 58% $ 132,797,128.90 GEN Genmin 0.160002 0% 0% 0% 0% $ 79,339,701.97 GRR Grange Resources. 0.415 -12% -7% -11% -46% $ 462,935,479.20 GWR GWR Group Ltd 0.105 12% 21% 14% -5% $ 33,727,748.78 HAV Havilah Resources 0.155 3% 0% -31% -53% $ 52,245,469.65 HAW Hawthorn Resources 0.07 -9% -16% -42% -20% $ 23,451,092.91 HIO Hawsons Iron Ltd 0.034 -3% 0% -3% -38% $ 32,167,487.07 IRD Iron Road Ltd 0.06 2% 0% -25% -50% $ 45,233,275.67 JNO Juno 0.059 -5% -26% -25% -30% $ 11,644,496.64 LCY Legacy Iron Ore 0.014 -7% -7% -7% -22% $ 107,989,675.67 MAG Magmatic Resrce Ltd 0.09 -9% 210% 73% 1% $ 25,188,170.63 MDX Mindax Limited 0.039 -3% -3% -28% -61% $ 79,776,792.42 MGT Magnetite Mines 0.265 0% 0% -25% -51% $ 25,100,803.88 MGU Magnum Mining & Exp 0.018 6% -25% -49% 0% $ 15,377,866.66 MGX Mount Gibson Iron 0.435 -3% -16% -4% -15% $ 534,548,842.52 MIN Mineral Resources. 68.21 4% 14% -3% -15% $ 12,915,485,940.76 MIO Macarthur Minerals 0.1 -20% -31% -43% -17% $ 18,287,883.68 PFE Panteraminerals 0.041 -20% -23% -20% -56% $ 11,261,211.24 PLG Pearlgullironlimited 0.025 -4% -4% 0% -29% $ 5,113,544.75 RHI Red Hill Minerals 5.4 2% 4% 27% 22% $ 345,078,198.00 RIO Rio Tinto Limited 120.39 4% -7% 1% 5% $ 43,610,480,820.72 RLC Reedy Lagoon Corp. 0.004 0% 0% -33% -31% $ 2,478,162.93 CTN Catalina Resources 0.004 0% 0% 0% -33% $ 4,953,947.57 SRK Strike Resources 0.052 4% 49% -7% -13% $ 13,903,750.00 SRN Surefire Rescs NL 0.01 -17% -17% -38% -44% $ 19,863,078.13 TI1 Tombador Iron 0.014 0% 0% -36% -44% $ 30,218,753.22 TLM Talisman Mining 0.18 0% -5% 20% 29% $ 35,780,866.31 VMS Venture Minerals 0.02 -5% 33% 74% -5% $ 45,333,594.04 EQN Equinoxresources 0.21 -21% -16% 24% 27% $ 24,282,000.72 AMD Arrow Minerals 0.005 -29% -17% 67% -29% $ 37,918,825.48 <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n While iron ore\u2019s fortunes remain deeply intertwined with China, BHP\u2019s Pant believes India will provide a strong source of replacement demand in met coal.<\/p>\n Although China does consume Australian met coal in its steelmaking industry, it supplies more of the product it needs from domestic sources than it does iron ore.<\/p>\n A shift to increased use of scrap steel and lower emissions steel tech like electric arc furnaces will also reduce its met coal demand over time.<\/p>\n But India has a strong build program ongoing in terms of blast furnace capacity.<\/p>\n \u201cOn met coal the drivers are a bit different. For met coal, India is a really big source of demand,\u201d Pant said.<\/p>\n \u201cAs India continues to build its country infrastructure, manufacturing base, steel will continue to be increasing in production in India, from currently 140Mt million tonnes, we expect Indian production of steel to double by the end of this decade. <\/p>\n \u201cAs it goes on the journey, it will require a lot of met coal. India does not have any endowment of met coal locally, and hence is a very big portion of demand for our met coal. <\/p>\n \u201cYou may not know that, but 40% of our met coal already goes to India, and as India starts to and other countries start to go on the journey for decarbonisation they will continue to pivot towards highest quality met coal. <\/p>\n \u201cAnd as you would know, we have reshaped our portfolio in the last couple of years towards highest quality metallurgical coal.\u201d<\/p>\n BHP has sold its hard coking coal, semi-soft and PCI producing assets in recent years, including the Poitrel and South Walker Creek mines purchased by Stanmore (ASX:SMR)<\/a> and the Daunia and Blackwater mines being acquired by Whitehaven Coal (ASX:WHC).<\/a><\/p>\n Pant says 85% of its output will be premium hard coking coal, which BHP expects to see achieve stronger margins as time goes by.<\/p>\n PHCC futures were trading for US$284\/t in Monday, while thermal coal was fetching around US$130\/t.<\/p>\n Those prices remain solid for lower cost producers, with Bengalla and New Acland owner New Hope (ASX:NHC)<\/a> announcing a $251.7m after tax profit and $143.7m dividend splash on its half year results yesterday.<\/a><\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em>\n<\/p>\n CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP NAE New Age Exploration 0.004 0% 0% -50% -33% $ 7,175,595.64 CKA Cokal Ltd 0.067 -11% -36% -36% -58% $ 73,368,530.64 BCB Bowen Coal Limited 0.047 -25% -28% -68% -83% $ 130,824,252.91 SVG Savannah Goldfields 0.03 -9% 0% -53% -81% $ 8,151,462.56 GRX Greenx Metals Ltd 0.9 -11% -9% -4% 57% $ 254,065,981.11 AKM Aspire Mining Ltd 0.185 0% 6% 99% 256% $ 93,912,842.23 AVM Advance Metals Ltd 0.039 8% 11% -68% -76% $ 1,443,058.34 YAL Yancoal Aust Ltd 5.51 -8% -1% 10% -1% $ 7,143,577,354.17 NHC New Hope Corporation 4.6 -3% -9% -25% -11% $ 3,744,836,105.52 TIG Tigers Realm Coal 0.006 0% 0% 0% -50% $ 78,400,214.21 SMR Stanmore Resources 3.17 -6% -11% -5% -1% $ 2,830,369,730.76 WHC Whitehaven Coal 6.4 -9% -10% -3% -4% $ 5,287,316,954.88 BRL Bathurst Res Ltd. 0.865 2% -1% -12% -7% $ 164,569,410.80 CRN Coronado Global Res 1.25 -2% -15% -30% -29% $ 2,078,802,625.20 JAL Jameson Resources 0.022 -29% -29% -56% -69% $ 9,586,133.08 TER Terracom Ltd 0.26 13% -4% -44% -54% $ 184,222,234.05 ATU Atrum Coal Ltd 0.004526 0% 0% 0% 0% $ 11,966,853.96 MCM Mc Mining Ltd 0.145 -9% 0% 7% -6% $ 59,144,157.88 DBI Dalrymple Bay 2.73 0% -1% -2% 4% $ 1,353,429,350.91 AQC Auspaccoal Ltd 0.082 49% -6% -29% -40% $ 44,115,212.83 <\/p>\nIron ore stutters as China fails to fire<\/h2>\n
Counting the toll<\/h2>\n
\nCapital expenditure on Rio Tinto-led steel decarbonisation projects and financial contributions to steel decarbonisation partnerships (subject to commercial agreements)
\nKnown milestones and timelines, anticipated expenditure and potential abatement opportunities of announced projects and partnerships (subject to joint venture partner approvals)
\nPotential abatement opportunities of announced projects and partnerships aligned to industry abatement curves and net zero decarbonisation scenarios\u201d<\/p>\nASX iron ore stocks<\/h2>\n
BHP still sees India as met coal Mecca<\/h2>\n
ASX coal stocks<\/h2>\n