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By Thomas Biesheuvel
Bloomberg – Anglo American’s iron ore and diamond output rose in the first quarter after production increased at its Minas Rio mine in Brazil and the gem market improved.
The company maintained most of its full-year forecasts but trimmed an estimate for nickel output.
First-quarter output of iron ore climbed 21% from a year earlier to 14.8 million tons, the London-based company said in a statement Monday. Diamond output from Anglo’s De Beers unit jumped 8% as mining started at the new Gahcho Kue mine in Canada and demand for the stones improved.
The century-old company is trying to engineer a turnaround to produce more materials from fewer mines. Anglo’s shares slumped to a record low in London in early 2016 as a rout in commodities sparked concerns about its debt position. Chief Executive Officer Mark Cutifani announced a plan to radically shrink the company through asset sales, but reversed the strategy earlier this year after recovering commodity prices revived profits.
While the company is focusing on copper, diamonds and platinum, bulk commodities such as iron ore and coal, which it had sought to exit, have performed better in the past year and helped drive a return to profit.
Metallurgical coal output rose 28% to 5.2 million tons while thermal coal production increased 6%. Copper output declined 3% to 142,600 tons while platinum was little changed at 572,000 ounces.
Anglo maintained all its full-year production targets except for nickel, which was cut to an expected 43,000 tons to 45,000 tons, from an earlier goal of 45,000 tons, due to unplanned maintenance at its Brazil mine.
Top iron ore forecaster says prices will sink back below $50
By Jasmine Ng
Bloomberg – Iron ore is destined to retreat back below $50 a metric ton next year as supplies go on rising, according to the top forecaster, who warned that weakening prices will probably encourage the sale of inventories.
The raw material will drop to average $62 in the third quarter and $59 in the final three months of this year before falling through 2018 to a low of $41, said Justin Smirk, senior economist of Westpac Banking Corp. Westpac placed first in predicting prices in the first quarter, according to data compiled by Bloomberg.
Iron ore was whipsawed last week after hitting a near six-month low as investors weighed signals of strength in the largest user China, including steel output at a record in March, against prospects for rising supply. Top miners including Brazil’s Vale SA are bringing on new capacity, bolstering seaborne sales, at the same time that miners in China have been reviving production. Smirk said that there’d been a huge ramp-up in Chinese supply.
“As supply builds up and prices come off, people will begin to question the wisdom of holding on to inventories,” Smirk said in a phone interview on Friday. “The signs are now pushing in one direction: while we’ll get some volatility, the momentum is just on a downward trend now.”
After the end of a volatile week, spot ore with 62% content in Qingdao rose 4.4% to $68.22 a dry ton on Friday, according to Metal Bulletin Ltd. The commodity – which hit $94.86 in February – averaged $86 in the first three months and $72 this quarter. On Monday, futures in Dalian and Singapore fell, with the SGX AsiaClear contract as much as 3.9% lower.
The outlook from Sydney-based Westpac – which also placed first for forecasting base metals – contrasts with Australia & New Zealand Banking Group’s view prices will settle between $70 and $80 over the rest of this year. Many other banks are pessimistic, including Barclays, which said in a note on Monday that while iron ore may recover in the short term, it’ll slump toward $50 by the fourth quarter as fundamentals deteriorate.
Goldman Sachs Group attributed iron’s recent drop to mills destocking, traders being forced to sell holdings as prices began to fall, as well as a decline in steel margins, according to an April 20 report. Earlier this month, the bank flagged prospects for iron ore weakness in the second half.
Among reasons cited by bears for a weaker outlook is the potential for more supply, both from mines in China and overseas. Mainland miners boosted production 16% in the first three months of 2017, official data showed. In Brazil, Vale posted record first-quarter output as the world’s largest shipper started exports from its $14bn S11D complex.
On Monday, Anglo American added to the picture of rising global production, saying output rose 21% to 14.8 million tons in the three months to March 31. Operations at its Minas Rio project in Brazil are ramping up toward a target of 26.5 million tons a year, the London-based company said in a statement.
Steel prices in China have been dropping, with the spot price of hot-rolled coil down almost 20% this year, according to Beijing Antaike Information Development. “We’ve also seen steel prices tipped over and margins of steel mills being compressed,” said Smirk. “The whole demand-driven supply shortage late last year that boosted Q1 has actually been reversed.”
There are tentative signs the stockpiles at China’s ports may be starting to be sold off, according to Smirk. After peaking at 132.5 million tons on March 24, holdings have dropped for four weeks, the longest streak since September, according to Shanghai Steelhome E-Commerce.
“If inventories were unwound and dumped onto the market, there’s a greater momentum for the downward side,” said Smirk, who’s tracked commodities for more than a decade. “That would be a very nervy sign for the market.”
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