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As iron ore is expanding a bull market on record sales to China, Australian BC Iron’s (ASX: BCI) managing director Morgan Ball said Tuesday the company expected prices for the steel-making material to remain comfortably above $100 a tonne until at least 2015, The Australian reports.
According to Ball, the somehow unexpected windfall is basically “money for jam,” as the cash costs for its Nullagine mine —expected to be below $50 a tonne this year— meant its margins would remain robust.
Shipments from Australia’s Port Hedland, the biggest iron- ore export terminal, to China jumped 43% to a record last month, port data show. The Asian nation already imported the most ore ever in September.
In terms of price, iron ore is up 23% from its 2013 lows struck at the end of May, thanks to Chinese spending on infrastructure that boosted Australian iron ore exports to record highs.
The price surge has benefitted giant and medium producers alike. BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO), for instance, have seen their shares jumping 25% and 21% respectively.
But the is rest of Australia’s iron ore players, which seem to be the big winners. Mount Gibson Iron’s (ASX: MGX) has gained a whooping 111% since June 30, Arrium’s (ASX: ARI) has climbed 93% and Fortescue Metals Group (ASX: FMG) has risen 92%.
Recovery of iron ore prices comes after a recent report from the World Steel Association showed global crude steel production in September rose to a rate of 4.42 million tonnes per day — a strong 4.6% month-on-month surge and 6.1% jump over last year’s figures.
Since then authorities in the area have risen their 2014 iron ore price forecast. In October, Australia’s Bureau of Resources elevated its predicted price to $119, up from $112 in June, citing Chinese demand. The World Bank said in a report last month that ore will average $135 next year, up from a July prediction of $125. Standard Bank expects prices to average $122 next year, 14% more than previously forecast.
Image by Don Bendickson
3 Comments
Abdul Samad
There have been a lot of factors affecting the price of Iron Ore including the capacity additions by Big3 (Vale, BHP, Rio), the huge infrastructure spending and the inventory holding by China. The Chinese would benefit by higher prices on long run, as it would support the Iron Ore projects by Chinese SOEs in Australia, Brazil and Africa.
Though there have been some forecast that the huge capacity additions coupled with steady or slightly decreasing demand from China may lead to decrease in prices by 2015, however with the current consumption rates and the lower level of inventory holdings by China, the prices maybe steady with average around $100 as mentioned in the article.
greg
Is this CNF or FOB Terminal pricing?
Think
It is actually money for Iron Ore, who writes these articles?