03-08-2014, 10:46 PM
Iron ore, coal tipped for gradual recovery
THE AUSTRALIAN AUGUST 04, 2014 12:00AM
Sarah-Jane Tasker
Reporter
Sydney
IRON ore and coking coal prices may have already reached the bottom, a leading commodity analyst says, but any recovery is going to be more gradual than in the past.
ANZ’s global head of commodity strategy, Mark Pervan, has outlined in an extensive report that with the stabilisation of the overall macro environment, commodity markets are entering the second half of 2014 on a positive note. But, Mr Pervan added, it was likely to be a far more gradual recovery than in the past.
“It will be tempered by lower liquidity and a stronger US dollar as the Fed nears policy normalisation,” he said. “Supply-side issues remain, but the bottom appears to have passed for coking coal and iron ore. Seasonal drops in power demand will cap any thermal coal recovery.”
His comments came as Luxembourg-based ArcelorMittal reported a profit of $US52 million ($56m) in the second quarter, compared with a loss of $US780m in the same period a year earlier.
The steel giant’s iron ore mining business suffered, though, recording a decline in profit on the back of lower iron ore prices.
“We were expecting prices to fall, but like any other mining company we are also surprised that this fall has come sooner — and like other mining companies we are more surprised about the fall in the coal price, which is much cheaper than anyone expected,” Arcelor Mittal chief executive Lakshmi Mittal said.
He said he remained “cautiously optimistic” on the outlook.
“We have seen a significant correction in iron ore prices for this year,” he said.
ANZ’s Mr Pervan said iron ore was showing signs of recovery but that it looked “hard-won”.
“Key consumers — Chinese steel mills — still don’t seem convinced higher prices are warranted, while high iron ore port stocks and rising seaborne supply remains on offer,” he said.
He said they could start changing that view, with Chinese iron ore port stocks declining marginally in recent weeks. Mr Pervan said if that trend continued, steel mill restocking activity should pick up. He said slower growth in new production in the second half should deliver slightly better prices near $US100 a tonne in the fourth quarter, when Chinese iron ore imports tended to seasonally strengthen.
On coal, ANZ expects the coking coal price to firm into the $US115 to $US120 a tonne range in the second half of the year.
Thermal coal continues to look “very weak”, according to the ANZ commodity team.
“We don’t expect any meaningful price recovery until well into the fourth quarter, with prices likely to hover around the $US70 a tonne level for the next few months.” Mr Pervan said.
THE AUSTRALIAN AUGUST 04, 2014 12:00AM
Sarah-Jane Tasker
Reporter
Sydney
IRON ore and coking coal prices may have already reached the bottom, a leading commodity analyst says, but any recovery is going to be more gradual than in the past.
ANZ’s global head of commodity strategy, Mark Pervan, has outlined in an extensive report that with the stabilisation of the overall macro environment, commodity markets are entering the second half of 2014 on a positive note. But, Mr Pervan added, it was likely to be a far more gradual recovery than in the past.
“It will be tempered by lower liquidity and a stronger US dollar as the Fed nears policy normalisation,” he said. “Supply-side issues remain, but the bottom appears to have passed for coking coal and iron ore. Seasonal drops in power demand will cap any thermal coal recovery.”
His comments came as Luxembourg-based ArcelorMittal reported a profit of $US52 million ($56m) in the second quarter, compared with a loss of $US780m in the same period a year earlier.
The steel giant’s iron ore mining business suffered, though, recording a decline in profit on the back of lower iron ore prices.
“We were expecting prices to fall, but like any other mining company we are also surprised that this fall has come sooner — and like other mining companies we are more surprised about the fall in the coal price, which is much cheaper than anyone expected,” Arcelor Mittal chief executive Lakshmi Mittal said.
He said he remained “cautiously optimistic” on the outlook.
“We have seen a significant correction in iron ore prices for this year,” he said.
ANZ’s Mr Pervan said iron ore was showing signs of recovery but that it looked “hard-won”.
“Key consumers — Chinese steel mills — still don’t seem convinced higher prices are warranted, while high iron ore port stocks and rising seaborne supply remains on offer,” he said.
He said they could start changing that view, with Chinese iron ore port stocks declining marginally in recent weeks. Mr Pervan said if that trend continued, steel mill restocking activity should pick up. He said slower growth in new production in the second half should deliver slightly better prices near $US100 a tonne in the fourth quarter, when Chinese iron ore imports tended to seasonally strengthen.
On coal, ANZ expects the coking coal price to firm into the $US115 to $US120 a tonne range in the second half of the year.
Thermal coal continues to look “very weak”, according to the ANZ commodity team.
“We don’t expect any meaningful price recovery until well into the fourth quarter, with prices likely to hover around the $US70 a tonne level for the next few months.” Mr Pervan said.