Iron Ore

While India leads the world in Direct-Reduced Iron production, the domestic industry has been facing an uphill production battle for the last four years.

Why Manufacturers Need to Ditch Purchase Price Variance

India’s DRI sector is hoping for help from the government and clarity in the overall steel policy to see it through, what many have dubbed, its most critical phase ever.

Demand DRIs Up

What is worrisome is that the falling demand for steel, especially construction steel globally, could further, negatively impact the sector. Some are quick to note that India’s DRI units need not worry much on this front as the market in India has remained insulated from global trends owing to steadily increasing domestic steel consumption.

Two other risks facing the sector are imported scrap being used by steel companies in India, DRI is an excellent substitute for scrap in electric arc furnaces, and the reliance by medium-sized DRI producers on inferior technology. That means technological limitations stop the producers from exploiting inferior grades of iron ore and coal.

Further, the limited availability of coking coal only motivates steel production in the country through a combination of DRI and blast furnace. What has added to the misery is the recent round of coal auctions held by the federal government.

Unable to Bid in Coal Auction

DRI companies were unable to participate in the auction, and a hitherto discounted source of fuel was lost, pushing the cost of DRI production by an estimated 40%, some have said. The DRI segment has brought this to the government’s attention.

While many steel companies prefer to use DRI instead of scrap, the slowdown in the global steel industry has seen some amount of the steel melting scrap being imported into India because of lower import duties. What makes steel plants happy in such cases, besides the cheap duty, is the fact that the imported scrap percentage works out to be higher, which eventually negates the cost of imported scrap.

To many analysts, the DRI sector in India is poised on the cusp of a turnaround, but only if there is adequate government backing as well as support from domestic steel companies. Even then, it could easily take four years for the industry to come back to an even keel and ramp up production.


Today in MetalCrawler, the sleepy iron ore market was jolted to life. Is it a shift from the bearish trends we’ve seen lately? Only time will tell.

BHP Dials Back Mining Expansion

Iron ore advanced after BHP Billiton Ltd. curbed expansion plans and supplies from higher-cost mines dropped, easing concern that global output will outpace demand and feed a global glut. Miners’ shares jumped.

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Ore with 62% content at Qingdao, China, rose 5.5% to $57.81 a metric ton early today, its highest since March 16. Benchmark iron ore is still 60% below the peak of $144.18 reached in August 2013. Visit our MetalMiner Indx for the latest prices.

Exports Fall for the Quarter

The Sydney Morning Herald’s Peter Ker writes that the week’s iron ore moves could have a major impact on markets if other producers follow BHP’s lead and constrain supply. Across Rio Tinto Group, Vale SA, Fortescue Metals Group, Arrium Limited, Mt. Gibson Iron and Grange Resources, exports were more than 19 million mt lower this quarter than in the December quarter, raising questions about why the iron ore price has fallen 28% during a period of supply weakness.


Morningstar recently published its Outlook for Basic Materials Stocks and the picture is still negative for base metals and mined metal inputs.

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The commentary is part of Morningstar’s Quarter-End Insights, a special report also featuring outlooks for the economy, stock market, credit market, and each sector.


US Sen. Lisa Murkowski, (R-Alaska), last week, introduced the American Mineral Security Act of 2015, a bill that promises “to prevent future mineral supply shocks and boost the competitiveness of our energy, defense, electronics, medical, and manufacturing industries.”

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The AMSA would require that the director of the US Geological Survey establish a list of minerals critical to the American economy and provide a comprehensive set of policies to address issues associated with their discovery, production, use, and reuse. It also would require that the federal government establish a methodology for the designation of critical minerals, based on potential supply disruptions and the importance of their use, and require the list to be reviewed and updated at least every two years.

Critical Minerals

There are also changes in permitting, the Federal Register process and the bill would extend an executive order issued by President Obama in 2012, regarding the permitting of important infrastructure projects, to mines that produce critical minerals and critical mineral manufacturing projects. The full bill is available online at the Senate website.


Here at MetalCrawler the steel and iron ore layoffs keep on coming, unfortunately.

More Minnesota Iron Ore Layoffs

U.S. Steel Corp. said Tuesday it plans to idle part of its Minntac plant at Minnesota’s biggest taconite iron ore mine and processing plant, resulting in about 680 layoffs due to low steel prices and foreign competition.

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U.S. Steel spokeswoman Courtney Boone said the layoffs are temporary at the Mountain Iron facility, which employs about 1,500 workers, but that the company can’t speculate how long they’ll last. She said that will depend on market conditions and customer demand. Three of the plant’s five iron ore processing lines will be shut down, she said.

Pittsburgh-based U.S. Steel already announced it would idle its Keetac plant in nearby Keewatin effective May 13, resulting in 412 workers laid off. And Magnetation LLC announced in February that it was shutting down its Keewatin plant, resulting in about 20 job losses. The mining region is about 200 miles north of Minneapolis.

China’s Metals Financing Industry Weakens

Incentives that for years drove Chinese imports of copper to obtain short-term loans are starting to become less attractive, slowing demand in the world’s largest consumer of the metal, according to the Financial Times.

Stocks of copper held in Chinese bonded warehouses fell in the first quarter, even though it is traditionally a period of oversupply, according to figures released by consultancy CRU, suggesting weaker demand for financing.

Chinese copper consumption in the quarter rose 0.7%, the weakest rate since 2008, according to their data.


Is there no end in sight for iron ore miners watching the relentless fall in the price of their product?

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“We hope not,” say consumers and steel mills, for whom the falling raw material cost has been a major element of lower steel prices.

Rio Tinto Group, BHP Billiton and Vale SA are still making money. They are blessed with huge deposits and enormous economies of scale that allow them to dig and ship vast quantities of high grade ore at the lowest breakeven price, but many smaller miners are in danger of slipping into the red and failing to meet huge debt piles they have built up developing mines.

Big Three Race to the Bottom

According to the Sydney Morning Herald today, the iron ore price for immediate delivery at the port of Qingdao in China, dropped 4% on Friday to $53.14 per metric ton, the lowest level since the daily pricing index began in 2009.

The big three are continuing to invest in new capacity hoping to drive out higher cost competitors and gain market share, much like Saudi Arabia and some allies in OPEC are doing with the price of oil.


The latest MetalCrawler news includes layoffs in Illinois, the costs of copper ore mining falling and a top iron ore executive wants to cap production.

U.S. Steel Lays off 2,080

U.S. Steel Corp. said it will temporarily idle its Granite City, Ill., plant as it consolidates its North American flat-rolled steel operations, reflecting weakened demand from the energy sector.

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The steelmaker said idling of the plant will impact roughly 2,080 employees at the operation. The layoffs are separate from those related to a permanent shutdown of the Granite City Works coke-making plant.

Copper Mining Costs Fall

A new study published Tuesday by SNL Metals & Mining shows the costs of mining copper have steadily declined over the past three years.

The report, comes barely a day after the benchmark US copper price jumped to its highest intraday level in three months, extending a surprising rebound in the battered commodity.

Fortescue Chairman Wants to Cap Iron Ore Production

The Australian Competition and Consumer Commission launched an investigation today into comments made by Fortescue Metals Chairman Andrew Forrest at a dinner in Shanghai in which he effectively called for collusion among miners, the Australian Business Times reported.

“All of us should cap our production now and we’ll find the iron ore price will go straight back up to $70, $80, $90,” Forrest said.

Fortescue issued a statement saying there were provisions in the Competition and Consumer Act which made the comments OK.


Richard Branson famously said “If you want to be a millionaire, start with a billion dollars and launch a new airline,” well the same statement could probably be applied to iron ore mining.

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Fortescue Metals Group Ltd., the world’s fourth-largest Iron Ore miner and once the darling of the Australian stock market has fallen from $35.8 billion in 2008 to a market value of $5.8 billion this week reports the Sydney Morning Herald. The reasons aren’t hard to find. Amid a massively oversupplied market the iron ore price has collapsed.

Erosion of Ore Prices

Benchmark 62% ore for immediate delivery into China fell $3.1, or 5.4%, to $54.50 a metric ton, according to the FT quoting Steel Index data. The iron ore price has declined 18% this year after falling almost 50% in 2014. Since the start of the month, the ore has dropped 13.5% the FT says, and Wednesday’s price was the lowest since TSI pricing records began in 2008.

As a result, Fortescue had to pull plans to raise $2.5 billion of additional debt as the yield demanded by investors proved “unfavorable” in the company’s words. Fortescue’s existing unsecured 2022 notes are quoted at 75.8 cents on the dollar, a yield of 12.08%, while the company’s existing $4.9 billion term loan maturing in 2019 fell to about 90.25 cents on the dollar from 91 on Monday and 96 on March 5. Meanwhile, Fortescue’s shares fell 5.3% to $1.865 in Sydney on Wednesday, the lowest close since January 2009.


In the last couple of months, the price of iron ore may have come down by about 15% in India, reflecting global trends, but local steel companies remain unimpressed. In fact, some have even gone on record to claim it was a case of too little, too late.

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The cheaper iron ore prices have gone down due to lower production costs of the ore, itself, and subdued demand in the domestic market. The state-run mineral producer, National Mineral Development Corporation (NMDC) had cut the price this month, too, by about $5 (Rs 300) per metric ton of lumps or higher grade iron ore and about $10 (Rs 500) per mt in fines, which contain less iron.

But steel companies said the price correction had come in too late and was too little to boost their margins. They said the NMDC price correction, and that by other iron ore manufacturers, had come “very late in the day,” and that it was also less than the global price correction.

Many steel companies in India have been relying on imported ore, once available at cheaper rates than Indian ore, to meet their needs. The Indian Government informed Parliament that while there was a dearth of iron ore in India, regional shortages due to the previous Supreme Court-imposed ban had led to a gap in supply and demand.


MetalCrawler’s latest news today includes an agreement in the oil strike that’s had managers camping in at a refinery in Toledo, Ohio.

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Low prices and cheap imports have caused a Minnesota iron ore operation to be shut down and Ford Motor Co.’s aluminum-bodied F-150 truck is enjoying sales success.