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Iron Ore


theflasherman

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I get the impression that whole sector has been overcooked.

Everybody and his dog has been on the band wagon: little upstarts you'd never given the time of day are suddenly in the News as the next best thing - just because they found something that looked rusty, out in Whoop Whoop where nobody has been looking.

 

Sure, the early bird and all that - miners that are close to transport and have a good client base, may be lucky and sell some. But where there's a few years between now and mining, there could well be enough supply, forcing newcomers to drop their prices if they want to get rid of their "treasure".

Talking about 40% price increases is fine - the question is, how long will that be sustainable until the bubble bursts?

 

It would be interesting to find out, how much iron ore each actual and/or hopeful miner believes they have in the ground; likewise, how much each miner is hoping to mine (and sell!) each year. Now THAT would be an interesting chart.

 

Does anybody have access to that information? Or know a broker's analyst well enough to persuade them into some research? ;)

 

PS: Any new information about the wellbeing of Stern Hu?

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Arty--why do you have the the impression iron ore sector has been overcooked--therefore do you not believe the China story--did they not double car production last year for instance--cars made out of steel--steel made out of iron ore?

 

Newcomers dropping their prices: How Come? they either sell under an annual contract or they sell at spot values.

 

Who has been talking Iron Ore up by 40%? The really reliable analysts reckon a rise of 20% for fines this year.

 

You ask--How much Iron Ore each miner or would be believes they have in ground--check all ASX quarterlies of the relavent companies, they have to declare such.

 

Does anybody have access to that information--yes everybody has via the ASX.

 

Know a brokers analyst etc etc: Now here I find myself unable to help--in spite of posessing reams of such information!

Why?

 

I spent 25 years building up my contacts, I pay a bit more per trade to recieve that highly valuable asessment, which company is doing what and when, which is overvalued/undervalued--if such analyst's info is available via a companies website that's fine--but from yours truly--No Dice!

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However, I do agree an awfull lot of BS is written without having any research carried out by punters--said all along that this would happen--it always does in any boom.

 

Only time I have fallen out with St Georges Terrace was when I wanted to put $10K on FMG at 60cents--to a man they all said it would be another Dog! (make my own decisions now100%---- based on reliable analasys)

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cars made out of steel--steel made out of iron ore

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flower

it's not like old days, that cars use alot of steels. alot of plastic subs for the car body these days. of couse the engine still need steel.

 

for iron ore, sure they need it, but that doesn't mean they have to pay unreasonable price, like-- we have to eat but we don't have to pay stupid price for loaf of bread. suply and demand flower.

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Thanks for replying, flower;

 

Yes, I thought you might have the contacts that would tell you. And it's not that I wasn't aware where the information can be found. When I asked if that kind of summary had already been compiled, I wanted to avoid dredging a few hundred websites, sifting through a few thousand pages of reports, which I'd then stick into a spreadsheet to feed a chart.

Yes, it would be "interesting", but not essential. Nor is it important enough for me to waste my time for.

 

Certainly not worth my spending "25 years building up my contacts" and paying four times as much or more brokerage. There aren't many Einsteins among the brokers, finacial advisors, and analysts I have met. Maybe Mark Kahuna would come close, but how many of his calibre are there? Most of them are run-of-the-mill citizens, fairly intelligent, fairly honest, and looking after Numero Uno like the rest of us. "You and I" type people, really.

 

That being so, I reckon after five years of studying and 15 years of trading, I can stand up for myself and make my own mistakes. No risk of being talked out of buying 60c FMG, or as it was in my case, of buying 20c Hardman.

 

Back to iron ore: There are price charts for precious metals, as well as non-ferrous stuff from aluminium, copper, right to zinc. There are also some estimates (of various reliability) of stockpiles, demand and supply estimates. For example, when I saw gold coming off its Highs and platinum beginning to look toppy as well, I tightened the risk margins for my PM stocks and took profit in time. Most recently, I sold the rest of PLA.

For iron ore, I haven't seen anything that would fit the bill. But never mind. I can (and do) tighten my risk margins even without such background information. Examples can be found in all the relevant share topics - MMX being the most recent one.

 

As regarding those supply estimates: Some fellow ShareSceners may consider my sugegstions and think a little more about prospects of iron ore miners and wannabes. That's what this Topic should be about.

 

That aside, if anyone does have some reasonably credible data, my offer stands:

Let me know where, or send me a spreadsheet, and I'm happy to turn it into a meaningful chart and projections into the future.

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I wanted to avoid dredging a few hundred websites, sifting through a few thousand pages of reports.

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Hi Arty, that is exactly my reasoning--though I dont want to stick it in a spreadsheet. I want a concise one page overview of the Commodity or Industry, with a quantity of stock picks that stand a well above average chance of success.

 

Ny 25 years of building contacts have allowed me to partake in some sensationally profitable broker originated opportunities called seed capital. My only attempt at going it alone as a subunderwriter in the IPO of ROH was a disaster! So I view a higher brokerage cost as an "opportunity cost"--and they still get thrown up--even at my age!

 

Were not talking the odd 100% profit trades here either. I dont have the same rather cynical view of the brokerage world as some--apart from anything else there is a pure social part to long standing relationships, I have been around many mining sites both mature and fledgling lead by the company CEO's. Have made some very longstanding personal friendships out of brokers and their analysts. Each to his own--I believe the stock market ihas more to offer me than keyboard bashing!

 

My broker friends kick themselves for not being a Twiggy beleiver (FMG)!!

 

I will continue to follow the geo political/financial background which impacts so greatly on Commodities--good job we dont all like the same methodology!

 

Will do what I can to find some more Wannabees with a high chance of success in all Commodity spheres--this commodity push is going to be with us for a very long time IMO. Everybody tells me how fascinating China is--maybe one day------

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oh dear :sadsmiley02:

How did we get that far away from the topic?

"...cynical view of the brokerage world"? I said they're people like you and I; when I look in the mirror, I don't feel cynical.

"...pure social part..." I too can socialise with company directors and financial advisors. My youngest daughter-in-law is even married to one. :wub:

 

None of that has got anything to do with my expressed observation/ tentative hypothesis/ concern that the current flood of new iron ore prospectors/ developers/ miners could soon lead to an oversupply of iron ore, which may leave the weaker upstarts or late entrants by the wayside. I would assume that, by way of normal expansion, the currently operating miners are or will soon be able to satisfy any demand. The noise surrounding some new, late entrants seems to have pushed the general expectation (and commensurately share prices) of anything to do with iron ore to extreme heights.

What if it turned out there is - or soon will be - more than enough of the brown stuff to go around?

 

Look at the charts of AGO, BCI, FMG, CFE, MGX, MMX, ...

 

Not that I personally need to ask Why? But I thought it could be interesting for some to find an explanation for it, and maybe even consider the potential consequences before buying yet another position in a junior miner. Let alone become sub-underwriter for one.

 

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Evening Arty--what leads you to believe the world is heading into an oversupply of iron ore? In fact there is a shortage of "fines"

 

The ABC tonight had a report on the state of the iron ore industry, and one analyst said that demand would increase because of the adoption of a new flexible (negotiably adjustable every few months) pricing system with the Chinese mainly.

 

ABC itself also said prices might increase by 50%--which is rubbish!

 

An explanation of why the share price of some established miners, and the expected price rise of newcomers may be by looking at what they individually produce, lump or fines.

 

Am not going through your list individually but do know one of the big attractions with FMG is their larger than normal access to higher value "fines".

 

Now why might a specific newcomer rise? Lets look at WDR, which I hold. My research tells me that the Roper Bar ore is of the high quality variety, is easily shipped by road to the coast some 30K's away and is easily produced by strip mining. and tightly held shares structure.

 

Itochu (Japanese trading company own 20%)

 

Main production aims for a 2012 startup, with early cash flow from the coastal high quality direct shipping ore, roadways to send that to the coast now going being built.

 

Drilling is going on apace both at Roper Bar, Mountain Creek and Rover. There should be plenty of catalytical ASX announcements coming over 2010 to assist trading.

 

I will agree there is mountain of junk being touted as the next sure thing iron ore miner, but it was always thus, be they tech stocks or anything else.

 

Prudency dictates accurate reliable personal research followed by astute stock picking and the ability to exercise PATIENCE!

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  • 4 weeks later...

From SMH today:

 

Vale puts its nail in benchmark's coffin

BARRY FITZGERALD

February 13, 2010

 

VALE, the world's biggest iron ore exporter, agrees with the chief executive of BHP Billiton, Marius Kloppers, that the cumbersome and often bitter annual benchmark system for pricing iron ore is all but dead.

 

The policy shift by the Brazilian company strengthens expectations that Australian iron ore producers will secure massive price increases for shipments in 2010, perhaps much more than the 30-40 per cent range that the market has been pricing in to share values.

 

Vale said steel customers had to realise contract prices in future must reflect spot market prices.

 

The move by Vale away from the benchmark system is expected to infuriate China, which is already aggrieved by the pricing power exerted by Vale and the big Pilbara producers - BHP and Rio Tinto - in a tight market, as is the case now.

 

Under the decades-old benchmark system, the first settlement by Vale or the Pilbara companies became the price for all other deals in any given year. Now, however, more than 50 per cent of the global seaborne trade is done at spot market prices.

 

For years, BHP under Mr Kloppers has been pushing for more transparent and flexible pricing by reference to the spot market. Vale has been a staunch defender of the benchmark system - but all that changed on Thursday night when Vale revealed its shift in attitude, taking the global market for seaborne iron ore trade along in the process.

 

Vale's director for ferrous metals, Jose Carlos Martins, indicated that the change was a response to the behaviour of the Chinese steel industry - the world's biggest - during the global financial crisis, and the huge difference between contract prices set last year and the current spot price.

 

''The markets that were buying, especially China, decided to buy differently instead of fulfilling their contractual obligations,'' he said.

 

During the financial crisis, spot prices fell below the benchmark - but they are now more than double benchmark prices, at about $US130 a tonne.

 

"Vale will always keep its policy of selling on a benchmark basis but we believe you can't keep such a huge difference between the spot and benchmark prices," Mr Martins said. ''It causes a lot of arbitrage in the system. Everyone is trying to buy on the benchmark to sell on the spot. So it's really a mess.

 

"The spot market is now almost 50 per cent of the total seaborne market and in China it is nearly 70 per cent of the total iron ore market.

 

''So the spot price is a reality, it has to be seen as the market price today. Our customers will have to accept a different price system."

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