Iron ore price, page-678

For a while now, I have daily price for FMG & 62% SPOT price during the day at Qingdao port and I didn‘t take too much notice of it in the past because I thought prices doesn‘t look right, but now I know it‘s ACCURATE.

Yesterday at Qingdao port, FMG‘s 58% IO sold for 400 yuan or US$58. 62% sold for 525 yuan or US$76. FMG is 76.2% realisation of 62% IO. So we are more than 1/2 way through April, the "discount" hasn‘t improve.

Yesterday at steel market had another "down" day, most products prices were down a little. Tangshan Billet ended the day down another 30 yuan to 2790. Billet still enjoy a margin of 200 yuan.

Cost for Rebar currently average at 2863 yuan, margin currently at 367 yuan, down 297 yuan from last week.

Cost for Wire currently average at 2853 yuan, margin currently at 367 yuan, down 207 yuan from last week.

I guess with the Demand still relatively low ATM, those "margins" would most likely to go down more, basically means both steel and IO prices still under pressure.

IO badically have too much supplies because of high IO price, and Chinese demand currently is not keeping up. If there are too many Indian IO on the market, the only way to "get rid" of them is lower IO price. Short term pain for long term gain, looks like IO price need to go down more so these high cost IO producers can leave the market. Then FMG can again enjoy a high premium for their IO against the 58% index.

At US$60/dmt 62% price, if FMG is getting 87.5% realised price, FY NPAT would still be US$2B, Cash flow still US$350M per month postive, can still repay US$700M per Q, and Debt Free in 18 months. Just taking a bit longer but SP would be slowly increase due to "less volatile" IO prices.

This will take sometime for IO and Steel market to find an "equilibrium", I think by June we should see favouable market conditions for FMG again.

DYOR.

Frank.