Vale SA

Vale has changed its product portfolio and quality in iron ore according to market demand. In 2017, it’s more focused on selling high-quality ore.

The drivers for Cleveland-Cliffs’ (CLF) top and bottom lines are quite different from the miners we’ve discussed in the previous parts of this series such as Rio Tinto (RIO), BHP (BHP), and Vale (VALE).

The Chinese automobile industry comes second, after the real estate sector, in consuming the most steel. In this article, we’ll look at the recent developments in this industry to track the associated iron ore demand.

In the previous part of this series, we discussed how the momentum in Chinese steel production in 2017 has come on the back of strong steel prices.

Iron ore prices in 2017 so far have been a roller coaster ride. Prices reached a peak of $95 per ton in February only to slump to a low of $53 per ton in July and take off soon after.

It’s important for investors to keep tabs on iron ore port inventories in China. Inventory levels show the balance between demand and supply for iron ore.

China’s total vehicle sales rose 2.0% in October 2017 compared to October 2016.

Vale’s (VALE) Ferrous division accounted for ~87.6% of its adjusted EBITDA in 3Q17, compared with ~82.0% in 2Q17.

China’s property sector China’s property sector is one of its most steel-hungry sectors, accounting for close to 50% of overall steel demand. Therefore, it is important for steel investors to keep tabs on the sector to gauge the steel demand outlook in China. China’s property sector once again appeared to be under stress in August. […]

China’s automobile industry is the second-largest steel consumer after the real estate sector.

China is the world’s largest consumer of iron ore. Therefore, to gauge the outlook for iron ore demand, it’s important to track China’s iron ore import data.

Wall Street analysts covering Cleveland-Cliffs estimate revenues of ~$2.4 billion in 2017. This implies growth of 14.7% year-over-year.

To gauge the steel demand outlook in China, it’s important to keep an eye on the property sector.

According to Reuters, the September 2017 steel rebar futures contract on the Shanghai Futures Exchange has risen 40% year-to-date.

China’s iron ore imports for July 2017 fell 2.4% over July 2016 to 86.3 million tons.

BHP Billiton (BHP) attributed the rise in iron ore prices to higher pig iron production in China, the preference for higher grade materials, and improved steel margins.

As we saw in the previous two parts of this series, Vale’s (VALE) iron ore and coal production increased sequentially in 2Q17.

Vale’s (VALE) ferrous division accounted for ~82%.0% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in 2Q17.

After significantly outperforming its peers in 1Q17, Vale’s (VALE) performance deteriorated in 2Q17.

Chinese steel production has been hitting one record after another. This renewed vigor in the Chinese steel industry is due to higher steel prices.

It’s important for investors to keep track of China’s iron ore import data because they provide a clue regarding the demand patterns for imported iron ore among Chinese mills and traders.

Rio Tinto (RIO) released its operational update for 1H17 on July 18, 2017. Rio’s iron ore shipments fell 6% year-over-year (or YoY) to 77.7 million tons in 2Q17.

Since China’s automobile industry is the second-largest consumer of steel after the real estate sector, it’s important to track its developments.

Based on its June 12, 2017, closing price, Cliffs Natural Resources is trading 15.2% and 11.9% higher than its 50-day and 20-day moving averages, respectively.

One of the major factors that led to the iron ore price rally in 2016 and 1Q17 was stronger-than-expected Chinese steel prices.

China’s iron ore imports recovered from a six-month low in April by importing 91.5 million tons in May 2017.

The estimated investment needed for Cliffs Natural Resources’ (CLF) HBI (hot briquetted iron) plant is ~$700 million.

In 1Q17, Vale’s (VALE) ferrous division accounted for ~89.0% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).

In 1Q17, Vale (VALE) significantly outperformed its major peers with a rise of ~25%.

Strong Chinese iron ore imports China imported 95.6 million tons of iron ore in March, compared with 83.5 million tons in February 2017. This figure implies a strong growth of 11% year-over-year (or YoY). This number is also the second-highest monthly amount on record. China imported 96.3 million tons of iron ore in December 2015. […]

Among the most dominant factors driving the recent iron ore price rally are higher steel production and the rise of steel prices in China (FXI).

Among the iron ore miners (PICK), analysts are most bullish on Rio Tinto (RIO), with 63% “buy” and 19% “hold” ratings.

China imported a total of 83.5 million tons of iron ore in February 2017, which represents a growth of 13% YoY (year-over-year) and -9.2% month-over-month.

Brazil (EWZ) is expected to see a reversal of the downward trend in its economic growth in 2017, mostly with the help of rising commodity prices and improvements in exports.

China’s iron ore imports were robust in 2016. While the country’s imports fell 7.6% year-over-year (or YoY) in December 2016, they hit a yearly record in 2016.

Since China is the world’s largest steel producer and exporter, it’s important for investors to keep track of Chinese steel prices.

Contrary to what’s been suggested by many market participants, China’s iron ore imports have been robust in 2016. In November, imports were 92.0 million tons.

Wall Street analysts covering Vale are projecting sales of $27.0 billion for 2016. That implies a revenue change of 4.4% year-over-year.

China’s weaker iron ore imports Contrary to what’s been suggested by many market participants, China’s iron ore imports have been robust in 2016. In October, however, the imports were at their lowest since February, at 80.8 million tons, down 13% month-over-month. On a year-over-year basis, the imports rose 7%. In the first ten months of […]

In August 2016, China’s iron ore imports came in at 87.7 million tons, a rise of 18.3% compared to 74.1 million tons in August 2015 but a slight fall of 0.8% compared to July 2016.

Morgan Stanley is bearish on the future prospects of iron ore prices. The broker estimates that the iron ore prices will fall to $40 per ton in 2H16 and $35 per ton in 4Q16.

In July 2016, China’s iron ore imports came in at 88.4 million tons. This was a rise of 2.7% compared to 86.1 million tons in July 2015 and 81.6 million tons in June 2016.

BHP’s total iron ore production increased by 2% in fiscal 2016 to a record 227 million tons.

In this series, we’ll analyze the demand-supply fundamentals for iron ore and see whether the recent surge was a one-off phenomenon or the start of a more sustained uptick in prices.

Just a few weeks old, 2016 started where 2015 left off for the iron ore industry. The benchmark seaborne iron ore prices were trading at $40 levels as of January 14, 2016, down 9% for the year.

China’s (MCHI) economic slowdown is the biggest challenge for global metal and mining companies, which is why iron ore investors should keep a close eye on the Chinese economy.

In 2015, Fortescue Metals Group (FSUGY) and Cliffs Natural Resources (CLF) fell 35% and 78%, respectively.

The Nullagine joint venture, where BC Iron owns 75% and Fortescue Metals (FSUGY) owns 25%, will cease production in 2016 due to weak iron ore prices.

Iron ore forms the biggest chunk of BHP Billiton’s revenues and earnings. For its latest quarter, the company delivered 7% year-over-year growth.

Brazil’s government has announced that it intends to start legal proceedings against Samarco, Vale, and BHP Billiton for Samarco’s tailings dam failure.