China rally sees return of iron ore, steel confidence

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China rally sees return of iron ore, steel confidence

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Category : Mining News , News

Both iron ore and steel have surged in China after investors scooped up commodities that were cheapened by a period of losses.

However, this could be shortened by uncertain demand outlooks.

According to the Dalian Commodity Exchange, iron ore futures increased six per cent to $114, while construction steel rebar also added six per cent to nearly $570 a tonne.

Coal and iron ore prices dropped from recent highs after a raise in transaction charges in Shanghai, Zhengzhou, and Dalian, which aimed to crack down on speculative trading, the AFR reports.

Analyst at CRU consultancy in Beijing, Richard Lu, said, “I think it’s driven by speculative trading again.”

In terms of steel, we haven’t seen any real support from the demand side.”

Lu went on to attribute the drop in steel demand to the start of winter in China as freezing temperatures have left many construction projects in the northern parts suspended.

The lower demand, however, could increase iron ore supply at China’s ports. Imported iron ore stockpiles hit a little over 110 million tonnes last week, a 2.83 million tonne jump from the week before – the highest since September 2014.

Share markets closed with significant gains in the mining sector, with BHP surging 96 cents to $25.24, according to The Bull. Rio Tinto had a $1.28 increase to $58.67 and Fortescue jumped 39 cents to $6.12.

Oil and gas also surged this week with Santos rising 15 cents to $4.15 while Woodside Petroleum jumped 71 cents to $30.50.

The rises in the oil market particularly came from returned confidence following the US election.

Michael Gable, Fairmont Equities managing director said, “It reflects the relief that the last six months, with Brexit and the election, is over.”

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Rio Tinto to offload Hunter Valley coal assets to China’s Yancoal

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Category : Mining News , News

Rio Tinto plans to sell subsidiary Coal & Allied Industries to China’s Yancoal for up to $US2.45 billion ($3.23 billion).

Coal & Allied is Rio Tinto’s thermal coal division in the Hunter Valley region of New South Wales. Its assets include majority shares in the Hunter Valley Operations mine, the Mount Thorley mine and the Warkworth mine. The three operations produced 25.9 million tonnes (Mt) of thermal and semi-soft coking coal in 2016, of which 17.1Mt were Rio Tinto’s share.

The proposed deal with Yancoal involves a $US1.95 billion upfront payment and the potential for a further $US500 million over five years. Once the deal is completed, Rio Tinto will also be entitled to potential royalties.

Rio Tinto chief executive Jean-Sebastien Jacques said the proposed sale was consistent with the company’s strategy of reshaping its portfolio to ensure the most effective use of capital.

We are confident that Coal & Allied will continue to contribute to the NSW economy and the communities of the Hunter Valley under a new owner,” Jacques said.

Rio Tinto has announced or completed at least $US7.7 billion of divestments since 2013, it said in a statement. The company also restructured the ownership of the Coal & Allied assets with joint venture partner Mitsubishi Development in 2016.

Yancoal, which is 78 per cent owned by China’s Yanzhou Coal Mining, would expand an Australian portfolio that already includes seven sites across Queensland and NSW with the transaction.

The ASX-listed Chinese company intends to fund the transaction through a capital raising and entitlement offer of its shares.

Yancoal chairman Xiyong Li said the Coal & Allied deal would be a transformative acquisition for the company and form the basis of its future growth in Australia.

Via the acquisition of Coal & Allied’s high quality asset portfolio, we will be delivering substantial cash flows to the company, quality coal products and long-term relationships with end-users in key global markets,” he said.

The transaction must still be approved by the Australian Government, NSW Government and Chinese regulatory agencies.

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Australia’s mining industry addressing downsize in China steel production

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Category : Mining News , News

China’s move to reduce air pollution in large cities by limiting its need for iron ore and coal production over the next five years won’t slow Australia’s mining industry, a federal government report has claimed.

Current forecasts expect Australia’s resources and energy commodity export earnings to reach a record high of $215 billion in 2016-17 – a 35 per cent increase from 2015-16.

While export earnings are also forecast to remain at the same in 2017-18, Mark Cully, chief economist for the department of industry, innovation and science, believes the future for Australia’s resources and energy sector is strong.

“The expected rise in export earnings has been driven by spikes in metallurgical coal and iron ore prices, supported by the resurgence of China’s steel sector, as well as temporary supply disruptions,” Cully said. “The report suggests the price gains are not expected to last over the medium term. Production of steel in China is expected to decline over the next five years, as construction activity slows.

“As prices decline beyond 2016-17, the value of Australia’s resources and energy exports are projected to decline. This will be thanks to the continuation of the production phase of the mining boom — which is not expected to peak until late 2019.”

Despite uncertainty surrounding the future of China’s steel industry, export volumes “are expected to continue to grow for iron ore, base metals, and coal”.

According to the report, the most important source of growth will be liquefied natural gases (LNG) while export volumes, which grew by nearly 50 per cent in 2015-16, are forecast to double in the next three years, as new production capacity comes fully online.

“Global demand for resource and energy commodities are expected to continue to grow in the next five years — but at a markedly slower rate than in the previous five years,” Cully continued.

“With reserves of high-energy coal and high-grade iron ore, demand for Australia’s resources will remain strong, as China moves away from using and producing low-energy coal and low-grade iron ore to limit air pollution in some of its large cities.”

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Mt Marion delivers first lithium shipment to China

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Category : Mining News , News

Mineral Resources’ Mt Marion joint venture project in the Western Australian Goldfields, sent its first lithium concentrate shipment to China on Tuesday. The 15,000 tonnes of lithium concentrate were loaded onto the MV Pacific Venus at the Port of Kwinana, heading to the China’s Zhenjiang port, to be delivered to Ganfeng Lithium.

Mineral Resources and Ganfeng Lithium both own a 43 per cent stake in the Mt Marion project, with Neometals owning the remaining share.

The shipment follows the project’s successful commissioning and ramp up of production, set to produce 400,000tpa at full capacity.

Neometals managing director Chris Reed said the project’s first shipment was a milestone for its company and partners.

Mineral Resources managing director Chris Ellison said the inaugural shipment from the project “is the outcome of hard work and dedication by the construction and operations teams of MRL (Mineral Resources)”.

“I also congratulate our Mt Marion partners on this important project milestone and thank them for their continued trust and support,” Ellison added.

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