July 9, 2008
July 9th (Reuters) – Cleveland-Cliffs Inc (CLF.N: Quote, Profile, Research) raised its outlook for iron ore revenue from its Asia-Pacific segment to $102 per tonne and its North American segment to $85 per short ton for 2008, it said Tuesday in a press release.
The mining company also increased its forecasts for 2009 revenues from the North American segment to about $107 a ton.
With 80 percent increases in recent iron ore pricing settlements for fines and 97 percent increases for lump in Australia, Cliffs said it now expects average revenue per tonne of about $102 for its Asia-Pacific iron ore segment for 2008, based on its anticipated product mix.
The new projection is 87 percent higher than the previous year, and up from its previous guidance of $89 per tonne, the international mining company said.
It also said it expects per tonne costs of about $55 for Asia-Pacific iron ore, up from previous estimates cof $53.
The company said the increase is due primarily to higher royalty payments related to larger year-over-year price increases than anticipated, along with rising energy costs.
The iron ore producer said its sees output volume of 7.8 million tonnes and sales volume of 8.0 million tonnes for the Asia-Pacific segment.
Cleveland-Cliffs also pushed up to $85 a ton its estimated revenue for its 2008 North American iron ore supply agreements, compared with previous guidance of $81 per ton.
To determine prices for the North American agreements, the the Cleveland, Ohio-based company said it needed to raise its steel pricing assumptions.
Using an annual average hot band steel price of $750 per ton at certain customer’s steelmaking facilities, it now expects a 34 percent increase in factors related to steel pricing, up from previous assumptions of $700 per ton and 25 percent, respectively.
The company said each $10 change from $750 per ton in the average hot rolled steel price will change the average realization price by $0.24 per ton, at certain steelmakers.
Cliffs said it expects 2008 North American iron ore costs to rise to about $56 a ton, up about 16 percent from 2007.
The increase over the iron ore producer’s previous expectation of $53 per ton is again primarily due to rising energy costs and higher-than-projected royalty payments.
Cliffs said it sees 2008 equity production of about 23 million tons and sales volume of 24 million tons as it sells through its inventory.
For 2009, it said it revised its outlook for its North American Iron Ore segment, which sells virtually all of its production under long-term supply agreements, up to an average realized price of about $107 per ton.
The 2009 price assumes no change in world pellet prices and no change in producer price indexes or steel pricing, it said.
The 26 percent increase over the average price expected for 2008 is based on contractual base-price adjustments, lag-year adjustments, and price caps contained in the company’s current supply agreements, it said.
Cleveland-Cliffs is the largest North American producer of iron ore pellets and a major supplier of metallurgical coal to the global steelmaking industry.
Its stock price firmed in after hours trade to 93.78 per share, up from 91.94 at Tuesday’s close.
July 8, 2008
July 8th (Bloomberg) – Oil and gas companies may help sustain record mining and energy investment in Australia, the world’s biggest shipper of coal and iron ore, until 2023 because of demand from China, according to forecaster BIS Shrapnel Pty.
Energy investment is growing strongly because of record prices and increased exploration, the Sydney-based business research and forecasting company said today in an e-mailed statement. The nation’s mining spending rose 22 percent to A$41.5 billion ($40 billion) in the 12 months ended June 30, it said.
Commodities are in their seventh year of gains and the so- called commodities “super cycle” may last another 15 years, according to Merrill Lynch & Co. The global commodities boom has spurred record profits and stock price gains for producers such as BHP Billiton Ltd. and Woodside Petroleum Ltd.
“It looks like a super cycle,” said Ken West, a partner at Melbourne-based Perennial Investment Partners Ltd., where he helps manage the equivalent of $2.8 billion. “ People are making a lot of money. It’s still a good time to be buying resource stocks.”
Woodside’s A$12 billion Pluto liquefied natural gas project is the biggest project by capital spending, the Australian Bureau of Agricultural and Resource Economics said in May. The biggest minerals project is the A$5.2 billion Sino iron ore project owned by Citic Pacific Ltd., the Hong Kong arm of China’s biggest state- owned investing company.
Deutsche Bank AG last month raised its “long term” forecast for crude oil, for the year 2013 and beyond, by 42 percent to $115 a barrel, while the long term natural gas forecast was raised 40 percent. Oil reached a record last week.
“Energy prices may be volatile in the short-term, but we believe that the long-term trend is for energy prices to move higher,” Adrian Hart, senior manager of the forecaster’s infrastructure and mining unit, said in the statement. “This will drive further increases in investment in oil and gas during the next ten to fifteen years.”
An expected trough in commodity prices in 2010 or 2011 won’t hinder record investment, the report said. “Soaring production will offset the impact of commodity price declines,” Hart said. “Strong growth in demand for steel, driven by the industrialization of China, is fueling the boom in iron ore and coking coal investment.”
Lead, nickel, zinc and copper will have the biggest price falls, the report said. Prices for coal and iron ore will rise until 2009 before beginning to fall between 2010 and 2012, it said.
“With demand continuing to grow at a sharp pace prices are not expected to fall back to the early 2000s lows, encouraging the development of new prospects and sustaining investment at record levels,” the report said.
To be sure, investment could fall should there be a severe downturn in the Chinese economy, the forecaster said. Increasing costs for materials and equipment and a shortage of skilled labor may also hinder investment as could one-off events, such as the explosion at Apache Corp.’s Varanus Island natural gas plant, it said.
The mining boom with help insulate the economy from recession for the next five years, the report said. “Historically high levels of mining investment, coupled with soaring production, is poised to offset the dampening impact of rising costs and interest rates, delivering GDP growth of between 2.5 and 4.5 percent per annum over each of the next five years,” it said.
June 15, 2008
June 15th (Steel Guru) – Merrill Lynch indicated that the iron ore price will keep rising and that the shortage of supply will continue to 2012.
Merrill Lynch said that because of China’s strong demand, the contract price is expected to rise by 20% in 2009. The estimation is higher than market expectation by 5% to 40%.
It said that increasing energy, labor, and facilities costs and exchange fluctuations will become the main problems which producers will focus upon.