Iron ore price, page-496

IO Future strong support and bounced off MA40, look like strong consolidation here. The turn is coming soon.

Spot Steel continue to drop across all products, rebar main market Shanghai down 50 yuan today, volume still thin.

When IO price drops, the most effected would be higher cost producers.

In term of margin, RIO has the highest margin, therefore it is also the least effected when there is a price drop. Follow by BHP, then FMG. I don't study VALE, I guess their margin probably not too bad.

The ones will be effected the most will be smaller producers and Chinese miners. So the Big 4 WILL be the winners, so you see RIO / BHP are having good days in expanse of smaller IO stocks.

For 6 months ended December, FMG's all in cost "exclude interest payment" was US$29 / wmt. Their realised price was US$56 / wmt, so a margin of US$27 / wmt.

Compare to their peers:
FMG: Cost US$29. Sales US$56, Margin $27 / wmt
BHP: Cost US$32, Sales US$63, Margin $31 / wmt
RIO: Cost US$32, Sales US$64, Margin $32 / wmt

Now Gloss Debt:

FMG: US$4.2B, expect to be paid off in 1 year or saving US$2.50 / wmt.
RIO: US$18B, my calculation say about 4 years to paid this off, interest US$1B+ a year, or US$3+ / wmt
BHP: US34B, my calculation about 5 years to paid this off, interest US$1.8B+ a year or US$4+ / wmt

Numbers still looks good for FMGs, I said today's action is shake some stop loss below $6, so I bought some at $5.98, let's see if we get a big bounce next 2 days leading into Q report on Thursday.

Just buy in Dips.

DYOR.

Frank.