(so long as you don't hold magnetite stocks)...tightens supply long term which is exactly what we want.
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China Slump Threatens Iron Ore Projects, Bureau Says (Update2) Share | Email | Print | A A A
By Rebecca Keenan and Jesse Riseborough
March 10 (Bloomberg) -- China’s slowing appetite for iron ore threatens plans to develop more than A$10 billion ($6.4 billion) of low-grade iron ore projects in Australia, the nation’s commodity forecaster said.
A forecast drop in contract iron ore prices may combine with the global financial crisis to delay magnetite ore projects, Jammie Penm, chief commodity analyst at the Australian Bureau of Agricultural and Resource Economics, said in an interview.
The worst recession since World War II has slashed demand for minerals and forced producers to delay or shelve projects as banks reduce lending. Atlas Iron Ltd. and Gindalbie Metals Ltd. are among companies planning magnetite mines in Australia as Chinese steel mills, the world’s biggest producers, press for the first iron ore price cut in seven years.
Magnetite mines “will certainly be put on hold or delayed,” said Mark Pervan, senior commodity strategist at Australia and New Zealand Banking Group Ltd. “The iron ore price is likely to be falling in the order of 40 to 50 percent.”
Atlas Iron declined 0.9 percent to A$1.17 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Gindalbie rose 2.7 percent to 57.5 cents. The benchmark index was 1 percent higher.
“A major consideration is the cost and there will be issues in terms of financing,” Penm said from Canberra. “There have not been a significant amount of announcements about cancellations yet, but they could come and we are closely monitoring that situation.”
Anshan Iron
Magnetite needs greater processing than higher-grade hematite ore, which accounts for about 96 percent of Australia’s output, according to Gindalbie.
Gindalbie’s partner, China’s Anshan Iron & Steel Group, is arranging the $1.2 billion of funds needed to start the Karara magnetite mine, said Michael Weir, a spokesman for the Perth- based company. The terms and conditions are being negotiated and the funding may be completed by June or July, Weir said.
“It’s the partnership that makes a difference in funding,” Weir said in an interview.
Atlas’s Managing Director David Flanagan wasn’t immediately available when contacted today.
The only magnetite mine in Australia is Grange Resources Ltd.’s Savage River operation in Tasmania state, according to the bureau. It produced 2.5 million metric tons of concentrate last year. Australian iron ore output was 310 million tons last year, according to the bureau.
“In the short term, there is going to be very depressed activity in the magnetite space,” said James Wilson, a resources analyst at DJ Carmichael & Co. “It would be easier to get funding for hematite right now.”
Citic Pacific Ltd., the Hong Kong traded arm of China’s biggest state-owned investment company, plans to spend A$5.2 billion to develop the Sino magnetite operation that could produce up to 27 million tons of concentrate and pellets a year. Aurox Resources Ltd. and Australasian Resources Ltd. also are planning magnetite mines.
