Citigroup (NYSE:C) reiterated a "Buy" on Cliffs Natural Resources (NYSE:CLF), while raising the earnings estimates of the company for 2010 and 2011.
Citigroup analyst Brian Yu said, "CLF continues to trade at a heavily discounted multiple of 5.9x on our 2011 estimate due to iron ore volatility, contracts in arbitration, and recent acquisitions. We see value and opportunity in the potential unwinding of compressed multiples."
Earning were raised because iron ore prices are expected to rise over the next couple of years.
Earnings per share for 2010 are $8.60 a share, while for 2011 they are estimated at $10.15 a share by Citigroup.
The financial institution also maintained its price target of $87 on Cliffs.
Cliffs was at $59.03 a share, dropping $1.19, or 1.98 percent.
Showing posts with label Iron Ore Prices. Show all posts
Showing posts with label Iron Ore Prices. Show all posts
Tuesday, August 31, 2010
Friday, July 30, 2010
Citigroup (NYSE:C) Maintains "Buy" Rating on Cliffs Natural Resources (NYSE:CLF)
Citigroup (NYSE:C) kept its "Buy" rating on Cliffs Natural Resources (NYSE:CLF), with a price target of $87 a share.
Even though they missed their earnings numbers in the last quarter, Cliffs
still generated earnings five times what they were last year in the second quarter, garnering $260.7 million, or $1.92 a share. Analysts were looking for $2.02 a share.
Still, iron ore prices are the key for the performance of Cliffs, and even if the economy slows down, steel should still be in demand a decent levels, which bodes well for the company.
Uncertainty about China, Europe and the United States makes this a difficult call, but Citigroup evidently believes Cliffs will perform well in the near term, and has called it that way.
Even though they missed their earnings numbers in the last quarter, Cliffs
still generated earnings five times what they were last year in the second quarter, garnering $260.7 million, or $1.92 a share. Analysts were looking for $2.02 a share.
Still, iron ore prices are the key for the performance of Cliffs, and even if the economy slows down, steel should still be in demand a decent levels, which bodes well for the company.
Uncertainty about China, Europe and the United States makes this a difficult call, but Citigroup evidently believes Cliffs will perform well in the near term, and has called it that way.
Thursday, July 29, 2010
Cliffs Natural Resources (NYSE:CLF) Earnings Up Fivefold
Cliffs Natural Resources Inc (NYSE:CLF) reported earnings for the second quarter surged by over five times what they were the year before in the same quarter, based on strong iron ore demand and higher prices.
Profits in the quarter increased to $260.7 million, or $1.92 a share, up from $45.5 million last year, or 36 cents a share. It was still below the $2.02 a share analysts had been looking for.
The earnings also had the benefit of iron ore prices rising to their peak level over the last 12 months during the quarter, making you wonder what lies ahead in what appears to be more economic slowdown in the steel sector.
Second quarter commodity prices were solid in general, and has helped many raw materials companies look good.
Now the obvious question is where do they go from here, as the global economy looks somewhat feeble at best.
Even in a slower economy though, iron ore demand should remain fairly strong, at least in the short term, and that could bode well for Cliffs Natural Resources and other iron ore producers.
Profits in the quarter increased to $260.7 million, or $1.92 a share, up from $45.5 million last year, or 36 cents a share. It was still below the $2.02 a share analysts had been looking for.
The earnings also had the benefit of iron ore prices rising to their peak level over the last 12 months during the quarter, making you wonder what lies ahead in what appears to be more economic slowdown in the steel sector.
Second quarter commodity prices were solid in general, and has helped many raw materials companies look good.
Now the obvious question is where do they go from here, as the global economy looks somewhat feeble at best.
Even in a slower economy though, iron ore demand should remain fairly strong, at least in the short term, and that could bode well for Cliffs Natural Resources and other iron ore producers.
Wednesday, July 28, 2010
ArcelorMittal (NYSE:MT) Misses Revenue, Lowers Guidance
Strong revenue wasn't enough for ArcelorMittal (NYSE:MT) to impress investors and traders, as they were able to generate $21.65 billion in revenue for the second quarter, a 43 percent gain, also beating analysts' estimates by close to $2 billion. They are getting punished though for missing on revenue, even though earnings outperformed.
Earnings per share were $1.13, on $1.7 billion in net profits, 43 cents above estimates.
Guidance was the most concerning for shareholders, as the third quarter looks weak for earnings, based largely on a slowing Chinese economy.
Chief Executive Officer Lakshmi Mittal said in this in a statement, “Although the third quarter will be impacted by a combination of seasonal factors and the effects of the economic slowdown in China, underlying demand continues to show improvement. The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers.”
Mittal added that profits could plunge by up to 30 percent in the third quarter from this quarter.
Other factors include the rising costs of iron ore at the same time demand is slowing. That should eventually push down iron ore prices, but that hasn't caught up with lower demand yet.
Earnings per share were $1.13, on $1.7 billion in net profits, 43 cents above estimates.
Guidance was the most concerning for shareholders, as the third quarter looks weak for earnings, based largely on a slowing Chinese economy.
Chief Executive Officer Lakshmi Mittal said in this in a statement, “Although the third quarter will be impacted by a combination of seasonal factors and the effects of the economic slowdown in China, underlying demand continues to show improvement. The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers.”
Mittal added that profits could plunge by up to 30 percent in the third quarter from this quarter.
Other factors include the rising costs of iron ore at the same time demand is slowing. That should eventually push down iron ore prices, but that hasn't caught up with lower demand yet.
Tuesday, July 27, 2010
AK Steel (NYSE:AKS) Exceeds Estimates, but Poor Guidance
Although AK Steel (NYSE:AKS) was able to turn things around some and turn a profit in the latest quarter, exceeding analysts' expectations, their guidance wasn't inspiring, causing investors to push the price of the stock down early in the trading day, and it remains down by well over 3 percent.
Earnings for the quarter were $26.7 million, or 24 cents a share, over three times the 7 cents a share analysts expected. Last year during the same quarter AK Steel lost $47 million, or 43 cents a share.
Revenue for the quarter, similar to US Steel (NYSE:X), surged by over double what it was last year, $793.6 million, to $1.6 billion.
Like their peers, there isn't much pricing power in the steel industry at this time, and the company expects prices to fall 5 percent in the quarter. That brings projections for price per ton down from $17 that was looked for to $15.
US steel also reported challenges for the next quarter on managing operational costs.
Iron ore costs are priced in to increase by about 65 percent next quarter for AK Steel and the rest of the steel industry.
Earnings for the quarter were $26.7 million, or 24 cents a share, over three times the 7 cents a share analysts expected. Last year during the same quarter AK Steel lost $47 million, or 43 cents a share.
Revenue for the quarter, similar to US Steel (NYSE:X), surged by over double what it was last year, $793.6 million, to $1.6 billion.
Like their peers, there isn't much pricing power in the steel industry at this time, and the company expects prices to fall 5 percent in the quarter. That brings projections for price per ton down from $17 that was looked for to $15.
US steel also reported challenges for the next quarter on managing operational costs.
Iron ore costs are priced in to increase by about 65 percent next quarter for AK Steel and the rest of the steel industry.
Monday, July 26, 2010
BHP (NYSE:BHP), Vale (NYSE:VALE), Rio Tinto (NYSE:RTP) Get Boost from Iron Ore Prices
Iron ore prices shot up to their highest levels in seven months, and Vale SA (NYSE:VALE), Rio Tinto Group (NYSE:RTP) and BHP Billiton Ltd (NYSE:BHP) are hoping it's a pattern that will continue, being the three largest suppliers of iron ore in the world.
The increase is being attributed to China buying up iron ore again, with the thinking being that drew from their stockpiles while hoping for prices to drop.
That can't be confirmed yet though, and it remains to be seen if they're really back in the market or traders drove the iron ore prices up.
Spot price for iron ore increased to $133.40 a metric ton, a gain of 5 percent.
China, the largest producer of steel in the world, acquires the iron ore for steel production.
The increase is being attributed to China buying up iron ore again, with the thinking being that drew from their stockpiles while hoping for prices to drop.
That can't be confirmed yet though, and it remains to be seen if they're really back in the market or traders drove the iron ore prices up.
Spot price for iron ore increased to $133.40 a metric ton, a gain of 5 percent.
China, the largest producer of steel in the world, acquires the iron ore for steel production.
Thursday, July 15, 2010
Goldman (NYSE:GS) Upgrades AK Steel (NYSE:AKS), Stock Surges
After Goldman Sachs (NYSE:GS) analyst Sal Tharani upgraded AK Steel (NYSE:AKS) from "Neutral" to "Buy," the stock soared.
The reasoning behind the upgrade was the continuing drop in the price of iron ore, which in the mid-term should help the company's share price.
The difference between AK Steel and its competitors is AK buys iron ore, while others who own their own mining projects suffer from the lower prices, giving AK an upper hand while that situation lasts.
In the short term, this may not be that important, but over time it will definitely be a plus for AK, according to Tharani. He added that the very profitable specialty steel segment isn't reflected in AK's share price, another reason for the upgrade.
Spot iron ore prices in China have plunged 35 percent since April 2010.
The reasoning behind the upgrade was the continuing drop in the price of iron ore, which in the mid-term should help the company's share price.
The difference between AK Steel and its competitors is AK buys iron ore, while others who own their own mining projects suffer from the lower prices, giving AK an upper hand while that situation lasts.
In the short term, this may not be that important, but over time it will definitely be a plus for AK, according to Tharani. He added that the very profitable specialty steel segment isn't reflected in AK's share price, another reason for the upgrade.
Spot iron ore prices in China have plunged 35 percent since April 2010.
Thursday, June 10, 2010
ArcelorMittal (NYSE:MT) Starts Up West African Iron Ore Mines Again
After closing down operations at two iron ore projects in West Africa, ArcelorMittal (NYSE:MT) has now restarted them again.
Located at Faleme in Senegal and Mount Nimba in Liberia, the two iron ore mines had operations suspended in 2009 in response to iron ore prices falling in response to decreasing demand.
Production for the Mount Nimbi project in Liberia is scheduled to resume sometime in the middle of 2011. No specifics on reopening Faleme were given by the company, although original estimates were to have it producing by 2011.
After delaying the projects in 2009, the company is cautiously moving forward in what appears to be a mild rebound in demand, although recent events in Europe with their sovereign debt crisis and slowdown in China, along with the U.S. economy going nowhere, has generated concerns in all companies supplying raw materials as whether or not demand in the near- and mid-term is going to grow.
Located at Faleme in Senegal and Mount Nimba in Liberia, the two iron ore mines had operations suspended in 2009 in response to iron ore prices falling in response to decreasing demand.
Production for the Mount Nimbi project in Liberia is scheduled to resume sometime in the middle of 2011. No specifics on reopening Faleme were given by the company, although original estimates were to have it producing by 2011.
After delaying the projects in 2009, the company is cautiously moving forward in what appears to be a mild rebound in demand, although recent events in Europe with their sovereign debt crisis and slowdown in China, along with the U.S. economy going nowhere, has generated concerns in all companies supplying raw materials as whether or not demand in the near- and mid-term is going to grow.
Wednesday, June 9, 2010
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) Offering Monthly Iron Ore Prices to Chinese
BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) are reportedly now offering steelmakers in China the option of monthly iron ore prices, in addition to the recent change to quarterly pricing.
"We will probably get a small proportion of contracted iron ore under the monthly pricing scheme, while the majority remains under the quarterly pricing scheme from Australian suppliers," said a senior official at Shagang, the fifth-largest Chinese steelmaker.
Chinese domestic steel demand is expected to grow at 15.8 percent in 2010, according to Macquarie, but drop to 8 percent in 2011, and 7.5 percent by 2012.
But now with China attacking the inflation related to its property market, it's hard to tell if those figures will remain the same, with some believing it will cause the sector to decline below former estimates.
"We will probably get a small proportion of contracted iron ore under the monthly pricing scheme, while the majority remains under the quarterly pricing scheme from Australian suppliers," said a senior official at Shagang, the fifth-largest Chinese steelmaker.
Chinese domestic steel demand is expected to grow at 15.8 percent in 2010, according to Macquarie, but drop to 8 percent in 2011, and 7.5 percent by 2012.
But now with China attacking the inflation related to its property market, it's hard to tell if those figures will remain the same, with some believing it will cause the sector to decline below former estimates.
Monday, June 7, 2010
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) Raising Iron Ore Prices
Contrary to other commodity prices, it seems iron ore remains a hot commodity, and BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) are going to raise prices again for the main ingredient to make steel, this time by close to 23 percent from the last quarter.
This price increase was made in relationship to Japanese steelmakers, although will apply to other buyers as well.
It is thought that Vale (NYSE:VALE) will follow in the footsteps of their peers and raise iron ore prices as well.
Prices after the latest increase per ton for iron ore will be at about $147 a ton, far above the 2009 fiscal prices, which were 140 percent less than today's prices.
Steelmakers are poised to add those extra costs onto their products, essentially passing the higher prices to consumers.
This does make one wonder if this is sustainable, as other commodity demand has fallen, and if demand has fallen for other metals used to make products, it's hard to see how iron ore and steel are able to stand on their own, as it points to demand drying up and people hanging onto their money.
I don't think the general public has processed what they're up against in the emerging or ongoing economic challenges in Europe, China and the U.S., and this could backfire on BHP, Rio and Vale if demand starts to implode on them and they're stuck with high prices with nowhere to go but down.
This price increase was made in relationship to Japanese steelmakers, although will apply to other buyers as well.
It is thought that Vale (NYSE:VALE) will follow in the footsteps of their peers and raise iron ore prices as well.
Prices after the latest increase per ton for iron ore will be at about $147 a ton, far above the 2009 fiscal prices, which were 140 percent less than today's prices.
Steelmakers are poised to add those extra costs onto their products, essentially passing the higher prices to consumers.
This does make one wonder if this is sustainable, as other commodity demand has fallen, and if demand has fallen for other metals used to make products, it's hard to see how iron ore and steel are able to stand on their own, as it points to demand drying up and people hanging onto their money.
I don't think the general public has processed what they're up against in the emerging or ongoing economic challenges in Europe, China and the U.S., and this could backfire on BHP, Rio and Vale if demand starts to implode on them and they're stuck with high prices with nowhere to go but down.
Tuesday, May 25, 2010
Vale (NYSE:VALE), BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Changing Iron Ore Story
The iron ore story is of course tied into the steel story, and they're joined at the hip. The move by Vale (NYSE:VALE), BHP Billiton (NYSE:BHP) to Rio Tinto (NYSE:RTP) change the way they price iron ore as far as on a quarterly basis versus the old way of annual pricing, has shook up the industry, and China along with it, as iron ore prices skyrocketed as a result.
Frustrated over lack of desired results of negotiating prices, China has taken several steps to lower their dependence on iron ore from these three major providers.
The two major steps are to import iron ore from other countries like Iran, and to increase domestic iron ore production. In April alone, domestic iron ore production increased 50 88 million tons, a 45 percent increase over April of 2009, and a 10.5 percent increase over March.
Add to that the probable and expected decrease in raw materials in China as a consequence of rising inflation, and you have a different iron ore demand picture than was recently portrayed.
China consumes the most iron ore, accounting for 54 percent of all world consumption, and also supplies 40 percent of all iron ore in the world, leading both categories.
Even so, at this time the three major iron ore suppliers, BHP Billiton, Vale and Rio Tinto have no intention of cutting back on expansion plans or capacity, meaning they believe the demand will exceed China's ability to meet it, and they'll have to pay top dollar to attain enough iron ore to meet their needs.
Yet there is also the European sovereign debt crisis hanging over the global economy, which could significantly cut back on iron ore and steel demand as austerity measures are implemented in the region.
The conclusion is the iron ore picture isn't near as clear as it was just recently, as China is the major part of the story, and how China goes, so will go the iron ore narrative.
For the reasons stated above, iron ore prices have already dropped 20 percent since the introduction of the quarterly pricing model, and it remains to be seen how much further they drop before they find a bottom.
For the steel industry in general, they've rebounded nicely today as far as stock prices go, as the drop in iron ore prices will expand the margins, and allow them to possibly drop prices to generate more revenue and earnings.
Frustrated over lack of desired results of negotiating prices, China has taken several steps to lower their dependence on iron ore from these three major providers.
The two major steps are to import iron ore from other countries like Iran, and to increase domestic iron ore production. In April alone, domestic iron ore production increased 50 88 million tons, a 45 percent increase over April of 2009, and a 10.5 percent increase over March.
Add to that the probable and expected decrease in raw materials in China as a consequence of rising inflation, and you have a different iron ore demand picture than was recently portrayed.
China consumes the most iron ore, accounting for 54 percent of all world consumption, and also supplies 40 percent of all iron ore in the world, leading both categories.
Even so, at this time the three major iron ore suppliers, BHP Billiton, Vale and Rio Tinto have no intention of cutting back on expansion plans or capacity, meaning they believe the demand will exceed China's ability to meet it, and they'll have to pay top dollar to attain enough iron ore to meet their needs.
Yet there is also the European sovereign debt crisis hanging over the global economy, which could significantly cut back on iron ore and steel demand as austerity measures are implemented in the region.
The conclusion is the iron ore picture isn't near as clear as it was just recently, as China is the major part of the story, and how China goes, so will go the iron ore narrative.
For the reasons stated above, iron ore prices have already dropped 20 percent since the introduction of the quarterly pricing model, and it remains to be seen how much further they drop before they find a bottom.
For the steel industry in general, they've rebounded nicely today as far as stock prices go, as the drop in iron ore prices will expand the margins, and allow them to possibly drop prices to generate more revenue and earnings.
U.S. Steel (NYSE:X), ArcelorMittal (NYSE:MT) Up on Positive Sentiment
Even though most analysts agree the metals industry is struggling, what has changed some of their minds is the degree to which that struggle is going to go, and with that in mind, there were some positive moves in the market today with metals, and steel companies like U.S. Steel (NYSE:X) and ArcelorMittal (NYSE:MT), among others.
Few believe there is going to be a huge change in demand any time soon, but the macro-economic conditions have changed in light of the inflation challenges in China and the European sovereign debt crisis, which has generated questions on the demand side of the equation, which not too long ago was considered easy to estimate on the upside.
That has all changed now, and the uncertainties are continuing to weigh on the market and general, and steel producers and metal providers specifically.
On one side you had the surging price of iron ore which was sure to hit the steel industry hard, but with the slowing demand in China, even that has changed quickly, with iron ore prices dropping about 20 percent since then.
Now the iron ore companies are growing concerned with the drop in prices, while the steel industry is breathing a sigh of relief, which has led to some of the more positive outlooks today, from the point of view of it not going to be as hard on the steel industry as thought just a little while ago.
Consequently, analysts think while a correction was justified, it degree of the correction wasn't, and since the market conditions have changed drastically, they've given a more positive view of the steel and metals industry, although still holding price targets down, as iron ore prices are still up high, and demand for other metals don't have many trends to follow and make decisions on, as the market has been volatile and hard to read for now.
Few believe there is going to be a huge change in demand any time soon, but the macro-economic conditions have changed in light of the inflation challenges in China and the European sovereign debt crisis, which has generated questions on the demand side of the equation, which not too long ago was considered easy to estimate on the upside.
That has all changed now, and the uncertainties are continuing to weigh on the market and general, and steel producers and metal providers specifically.
On one side you had the surging price of iron ore which was sure to hit the steel industry hard, but with the slowing demand in China, even that has changed quickly, with iron ore prices dropping about 20 percent since then.
Now the iron ore companies are growing concerned with the drop in prices, while the steel industry is breathing a sigh of relief, which has led to some of the more positive outlooks today, from the point of view of it not going to be as hard on the steel industry as thought just a little while ago.
Consequently, analysts think while a correction was justified, it degree of the correction wasn't, and since the market conditions have changed drastically, they've given a more positive view of the steel and metals industry, although still holding price targets down, as iron ore prices are still up high, and demand for other metals don't have many trends to follow and make decisions on, as the market has been volatile and hard to read for now.
Citigroup (NYSE:C) Upgrades AK Steel (NYSE:AKS) to "Buy"
Saying he believes the correction of AK Steel (NYSE:AKS) is overdone, Citigroup (NYSE:C) analyst Brian Yu upgraded the company from "Hold" to "Buy."
Yu likes the stainless steel segment of the company, while recognizing the upward pressures on iron ore prices and how they will affect AK Steel and the rest of the industry.
Two forces on working on iron ore prices, one in the short-term, which has already happened, with prices surging, and one for the long-term, which is related to the uncertainties of the potential lowering of demand from China could cause prices to tumble from where they are today.
The near-term term concerns are how the rising prices will affect margins for AK Steel from higher input costs.
Yu likes the stainless steel segment of the company, while recognizing the upward pressures on iron ore prices and how they will affect AK Steel and the rest of the industry.
Two forces on working on iron ore prices, one in the short-term, which has already happened, with prices surging, and one for the long-term, which is related to the uncertainties of the potential lowering of demand from China could cause prices to tumble from where they are today.
The near-term term concerns are how the rising prices will affect margins for AK Steel from higher input costs.
Wednesday, May 19, 2010
Did BHP (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale SA (NYSE:VALE) Iron Ore Pricing Strategy Backfire?
The quick change in the economic scene has put pressure on iron ore producers BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Vale SA (NYSE:VALE), as the surety that the commodity bull market would continue on unabated could come back to haunt them.
While there is no doubt the commodity bull market will keep going, the corrections and probable short-term drop in demand could hurt the companies.
Some China observers think the three iron ore producers may have believed China would continue on with their double-digit annual economic growth, but I would be surprised if that was so, as many economists and China leaders have said they think it would be closer to the upper single digits.
With the growing inflation and housing market challenges growing, China is taking steps which could cut their annual economic growth in a way that could cause some short term pain to them.
Even a drop in growth of one or two percentage points in a country as large as China would have dramatic impact on the three companies.
The change in the way iron ore is priced is a good move over the long term, but in the short term, as we probably will soon see, it isn't as favorable to the businesses.
Iron ore pricing was recently changed from a benchmarking system of a year, to that of three months in most cases, and to a smaller degree - one month.
Even short-term this would and will benefit the iron ore miners, as long as prices continue to go up. If not, they're going to get hit hard by a fall in prices, which at this time is likely to happen.
While there is no doubt the commodity bull market will keep going, the corrections and probable short-term drop in demand could hurt the companies.
Some China observers think the three iron ore producers may have believed China would continue on with their double-digit annual economic growth, but I would be surprised if that was so, as many economists and China leaders have said they think it would be closer to the upper single digits.
With the growing inflation and housing market challenges growing, China is taking steps which could cut their annual economic growth in a way that could cause some short term pain to them.
Even a drop in growth of one or two percentage points in a country as large as China would have dramatic impact on the three companies.
The change in the way iron ore is priced is a good move over the long term, but in the short term, as we probably will soon see, it isn't as favorable to the businesses.
Iron ore pricing was recently changed from a benchmarking system of a year, to that of three months in most cases, and to a smaller degree - one month.
Even short-term this would and will benefit the iron ore miners, as long as prices continue to go up. If not, they're going to get hit hard by a fall in prices, which at this time is likely to happen.
Thursday, May 13, 2010
BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale (NYSE:VALE) and Iron Ore Demand from China
As China implements measures to cool off its economy, iron ore producers like BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Vale (NYSE:VALE) are starting to get concerned on how it will impact the demand for iron ore from them.
Many raw materials companies have the same concerns, as many have been counting on increasing demand from China to help them through these slow economic times.
Just last month iron ore prices stood at two-year highs of $184.80 a ton, and now has dropped to $169.5 a ton in that short time.
The major element going forward is whether or not decreasing supply from India because of the monsoon season will offset the lower demand in the market.
Consequently, depending on which you believe to be the case, iron ore prices have been projected to drop as low as $150 a ton or rise to over $200 a ton by the summer.
Many raw materials companies have the same concerns, as many have been counting on increasing demand from China to help them through these slow economic times.
Just last month iron ore prices stood at two-year highs of $184.80 a ton, and now has dropped to $169.5 a ton in that short time.
The major element going forward is whether or not decreasing supply from India because of the monsoon season will offset the lower demand in the market.
Consequently, depending on which you believe to be the case, iron ore prices have been projected to drop as low as $150 a ton or rise to over $200 a ton by the summer.
Wednesday, April 28, 2010
Vale SA (NYSE:VALE), BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO) Pressing China on Iron Ore Prices
Vale SA (NYSE:VALE) (SAO:VALE5), BHP Billiton (ASX:BHP)(NYSE:BHP) and Rio Tinto (ASX:RIO) (NYSE:RTP) have reportedly threatened China that they will cut off iron ore supplies if the steelmakers in the country don't accept the price demands they're offering, according to the China Iron & Steel Association.
The major three iron ore producers in the world have sought price increases from between 90 percent to 100 percent, as demand for iron ore grows around the world, with China being the largest consumer of iron ore.
All of this started when the mining companies broke with the past practice of selling iron ore on annual contracts and negotiated a 90 percent increase in price with mills in Japan.
In a counter move, China has said they have begun an investigation to see if the three large iron ore producers are monopolizing supplies.
Apparently China has about two months of iron ore stockpiled as of the latter part of March, which means the pressure ramping up with only about a month left at this time.
Demand for steel is estimated to grow by over 10 percent in 2010, which has resulted in a growing demand for iron ore in competing countries and businesses.
The major three iron ore producers in the world have sought price increases from between 90 percent to 100 percent, as demand for iron ore grows around the world, with China being the largest consumer of iron ore.
All of this started when the mining companies broke with the past practice of selling iron ore on annual contracts and negotiated a 90 percent increase in price with mills in Japan.
In a counter move, China has said they have begun an investigation to see if the three large iron ore producers are monopolizing supplies.
Apparently China has about two months of iron ore stockpiled as of the latter part of March, which means the pressure ramping up with only about a month left at this time.
Demand for steel is estimated to grow by over 10 percent in 2010, which has resulted in a growing demand for iron ore in competing countries and businesses.
Tuesday, April 20, 2010
George Soros' Gold Bubble Stupidity
Earlier in the year George Soros made the ridiculous comment that gold was in a bubble, but not only that, it was "the ultimate bubble," said Soros.
Of course he's been proven to be completely wrong, as the fading former investing star obviously was playing investors in an attempt to influence gold on his behalf, as he had invested millions in gold companies not too long before he made the statement.
It's quite possible he had shorted the position and was hoping investors would flee gold and prices would plunge. He could make a ton of money that way, or he may have been trying to get people to sell their positions in gold mining companies and then buy up a bunch of shares at depressed prices.
Either way, it didn't work, and gold continues to have support, and there's little in the near future that will change that, and in the long term it seems that will be the case as well.
Of course when interest rates are ultimately raised, we'll see at that time how far gold has decoupled from the U.S. dollar and if it's standing on its own in a way it hasn't for a long time.
There are so many variables at this time, it's impossible to see very clearly, even in the short term, and with the U.S. government, and other governments around the world, interfering and influencing markets in major ways, it's hard to tell what they may do to upset things, as it's usually something stupid with the normal unintended consequences.
Even if there is a major gold correction, I don't think we'll be seeing it fall far below $1,000 an ounce any time soon, and even if it does, the economic climate we live in and the inevitable economic challenges we're going to continue to face in the near future, gold will remain one of the few safe places people will run to, and that isn't even bringing inflation into the picture, which is happening in a number of sectors already, such as iron ore and copper prices.
Of course he's been proven to be completely wrong, as the fading former investing star obviously was playing investors in an attempt to influence gold on his behalf, as he had invested millions in gold companies not too long before he made the statement.
It's quite possible he had shorted the position and was hoping investors would flee gold and prices would plunge. He could make a ton of money that way, or he may have been trying to get people to sell their positions in gold mining companies and then buy up a bunch of shares at depressed prices.
Either way, it didn't work, and gold continues to have support, and there's little in the near future that will change that, and in the long term it seems that will be the case as well.
Of course when interest rates are ultimately raised, we'll see at that time how far gold has decoupled from the U.S. dollar and if it's standing on its own in a way it hasn't for a long time.
There are so many variables at this time, it's impossible to see very clearly, even in the short term, and with the U.S. government, and other governments around the world, interfering and influencing markets in major ways, it's hard to tell what they may do to upset things, as it's usually something stupid with the normal unintended consequences.
Even if there is a major gold correction, I don't think we'll be seeing it fall far below $1,000 an ounce any time soon, and even if it does, the economic climate we live in and the inevitable economic challenges we're going to continue to face in the near future, gold will remain one of the few safe places people will run to, and that isn't even bringing inflation into the picture, which is happening in a number of sectors already, such as iron ore and copper prices.
AK Steel (NYSE:AKS) Iron Ore Price Warning
After a warning from AK Steel (NYSE:AKS) on the potential negative impact of iron ore prices on their second-quarter resulst, the shares quickly dropped 6 percent on the guidance.
AK Steel qualified the statement by saying they're referring to if the price of iron ore exceeds the current 30 percent iron ore price increase assumed by the company.
Much of this stems from a global iron ore price not being set at this time for 2010, and until that happens, there is no way of knowing what the earnings of the company will be for the quarter.
“While AK Steel only buys a small amount of their iron priced to global, there is a formula for the rest that is loosely based on the global price,” said Michelle Applebaum, head of a steel-research firm in Highland Park, Illinois.”
This is typical of how this earnings season is going, as investors are looking at guidance more than the numbers reported because of the terrible year last year, which in many cases can make the results appear better than they really are when contrasted with the year before.
So even though AK Steel improved from their $73.4 million loss from last year during the same quarter, posting earnings of $1.9 million or 2 cents a share, over the loss of 67 cents a share last year, investors want to know what the company sees going forward, and what they see doesn't inspire a lot of confidence at this point, although it still has to play out before we know for sure.
AK Steel qualified the statement by saying they're referring to if the price of iron ore exceeds the current 30 percent iron ore price increase assumed by the company.
Much of this stems from a global iron ore price not being set at this time for 2010, and until that happens, there is no way of knowing what the earnings of the company will be for the quarter.
“While AK Steel only buys a small amount of their iron priced to global, there is a formula for the rest that is loosely based on the global price,” said Michelle Applebaum, head of a steel-research firm in Highland Park, Illinois.”
This is typical of how this earnings season is going, as investors are looking at guidance more than the numbers reported because of the terrible year last year, which in many cases can make the results appear better than they really are when contrasted with the year before.
So even though AK Steel improved from their $73.4 million loss from last year during the same quarter, posting earnings of $1.9 million or 2 cents a share, over the loss of 67 cents a share last year, investors want to know what the company sees going forward, and what they see doesn't inspire a lot of confidence at this point, although it still has to play out before we know for sure.
Saturday, April 17, 2010
Vale (NYSE:VALE), Rio Tinto (NYSE:RTP), BHP Billiton (NYSE:BHP), Under Investigation by Chinese
Vale, Rio Tinto, BHP Billiton and China
The Chinese have stated they are undertaking an investigation into iron ore giants Vale (NYSE:VALE), Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP) over the possibility they have illegally worked together as a monopoly to manipulate iron ore prices to their advantage.
China has fought hard to use its status as the largest importer of iron ore to negotiate better prices for themselves, but have been resisted strongly by the three leading iron ore producers.
This latest move seems to be a tool being used by the Chinese to influence the process and hopefully get the mining companies to capitulate.
The Chinese have stated they are undertaking an investigation into iron ore giants Vale (NYSE:VALE), Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP) over the possibility they have illegally worked together as a monopoly to manipulate iron ore prices to their advantage.
China has fought hard to use its status as the largest importer of iron ore to negotiate better prices for themselves, but have been resisted strongly by the three leading iron ore producers.
This latest move seems to be a tool being used by the Chinese to influence the process and hopefully get the mining companies to capitulate.
BHP Billiton (ASE:BHP), Rio Tinto (ASE:RIO) Joint Venture Timeline Extended
BHP Billiton and Rio Tinto iron ore joint venture
BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RIO) had their timeline extended by the Australian Competition and Consumer Commission in order to give the two companies more time to respond to concerns over the joint venture between the two companies, which has brought concerns over a potential monopoly.
The joint venture would involve iron ore production, which is in high demand at this time, and should be for the foreseeable future.
Even with the potential regulatory hurdles the companies face, there are other challenges, especially the possibility of shareholders of Rio Tinto voting the deal down because it seems to favor BHP Billiton.
Even if those two barriers are crossed, it will be extremely difficult to get past the European Commission, which is considered the largest challenge the deal has before it.
BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RIO) had their timeline extended by the Australian Competition and Consumer Commission in order to give the two companies more time to respond to concerns over the joint venture between the two companies, which has brought concerns over a potential monopoly.
The joint venture would involve iron ore production, which is in high demand at this time, and should be for the foreseeable future.
Even with the potential regulatory hurdles the companies face, there are other challenges, especially the possibility of shareholders of Rio Tinto voting the deal down because it seems to favor BHP Billiton.
Even if those two barriers are crossed, it will be extremely difficult to get past the European Commission, which is considered the largest challenge the deal has before it.
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