iron ore supply will continue to disappoint

Jim Lennon told Terrapinn's iron ore conference in London that the main supply problems lie in securing financing, issues building out infrastructure, delays due to environmental permitting--particularly in Brazil and Africa--and depleting grades, especially in Australia.

"Iron ore looks set to remain fundamentally tight towards the end of the decade," he said.


Chinese iron ore output is already high cost, and rising. Lennon said costs have risen from around $85/ton in 2008 to around $136/ton currently, rising to $ 150/ton next year and $161/ton in 2013.

WPG looks even better potential than before, IMO.

Full article as follow:

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201107050723dowjonesdjonline000119&title=iron-ore-supply-will-continue-to-disappoint-macquarie

Iron Ore Supply Will Continue To Disappoint-Macquarie

LONDON -(Dow Jones)- Iron ore supplies are set to disappoint with Chinese production in particular continuing to decline, an analyst at Macquarie Securities Group said Tuesday.

Jim Lennon told Terrapinn's iron ore conference in London that the main supply problems lie in securing financing, issues building out infrastructure, delays due to environmental permitting--particularly in Brazil and Africa--and depleting grades, especially in Australia.

"Iron ore looks set to remain fundamentally tight towards the end of the decade," he said.

Chinese domestic iron ore output is set to continue to decline from around 333 million metric tons currently, based on a 62% iron ore content, to around 202 million tons by 2016.

"Apparent Chinese iron ore production rebounded in 2010 as prices recovered, but remains well below peaks," Lennon said. "Declining grades, rising costs and environmental concerns act as a constraint. Chinese iron ore output is pretty flat at current prices," he noted, adding that around 100 million tons of output that was produced before prices fell during the downturn remains out of the market.

China is a net buyer of iron ore to make steel, although produces a certain amount domestically.

But Lennon said China's government doesn't like the impact of iron mining as a rule, due to a lack of proper corporate social and environmental responsibility by Chinese miners. "The government has now started heavy taxing, and costs are rising," he added.

Chinese iron ore output is already high cost, and rising. Lennon said costs have risen from around $85/ton in 2008 to around $136/ton currently, rising to $ 150/ton next year and $161/ton in 2013.

This is in part due to rising producer price inflation, a stronger Chinese currency against the dollar, rising labor costs and declining grades and output there, he noted.

"China will have to scour the globe for more non-traditional supply," Lennon said. "China's need to diversify highlights how tight the iron more market is."

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@ dowjones.com

Full article as follow.