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Bulk Buys: Is the outlook for iron ore as bleak as the future for Twitter?
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- Iron ore could be in for a rough end of 2023 if China’s manufacturing and property sectors continue to struggle
- Production cuts are on the way in Tangshan this month, with Fitch’s research arm BMI lowering its 2023 forecast from US$125/t to US$110/t
- Australia’s thermal coal export value to more than halve between FY23 and FY25
For those who love indulging in a bit of billionaire bashing, the calamitous week at Twitter headquarters has been as delectable as the degustation Ralph Fiennes delivers the irritable collection of sycophants and dumbasses who dine to their death in 2022 schlock reel The Menu.
And so Twitter’s either drain-circling demise or Musk’s great escape is unfurling before our eyes.
A platform beloved for its accessibility and ability to build virtual communities of both heartwarming and fear-inducing natures, is more in the hands of those willing to pay for their own torture than ever before.
Musk, reputedly to prevent data scrapers from running rampant on the Tesla founder’s plaything but possibly also to turn more customers into paid ‘verified’ accounts, has introduced viewing limits on the site.
They mean verified users, who previously paid $8 for nothing more than fellating their own ego by wearing an online celebrity costume to a party only existing in their own mainframe, can access 10,000 tweets a day.
Unverified users, like yours truly, can get 1000 into our pupils, while new accounts can scan 500.
Meanwhile Twitter’s facing new competition from Facebook and Instagram owner Meta and a dispute over the non-payment of fees for office fitouts in Sydney.
Is it as bleak as it seems?
That’s where we’ll make our awkward segue into the bulk commodities news du jour, which is a claim from Fitch commodity research arm BMI that’s the outlook facing iron ore.
How bleak is it really? Let’s take a look.
Iron ore to US$110 this year
Behind it all is some tough manufacturing PMI data out of China.
The National Bureau of Statistics has shown large state owned enterprises have seen manufacturing activity in contraction territory for the fourth straight month.
The Caixin PMIs, for small non-state owned businesses, are still in expansion mode, but fell short of expectations in June.
“We are revising downward our 2023 iron ore price forecast from an annual average of USD125/tonne to USD110/tonne, as a weak rebound in Mainland China’s industrial sector has pressured sentiment and demand for ferrous metals,” BMI said.
“China’s industrials faces a weaker recovery as compared to services and its property sector still struggles with growth, pressuring iron ore prices.
“Manufacturing PMI returned to contractionary territory and signals a bleak outlook for iron ore.”
Ouch.
It should be said US$110/t is around where we’re at already. In fact, one could argue BMI’s previous outlook may have been overly bullish.
Singapore 62% Fe futures were taking US$108.95/t yesterday arvo.
Longer term BMI is extremely bearish. It sees iron ore sliding to US$50/t by 2032.
Is there any upside?
There sure is. That could come if China gets serious about stimulating its property sector.
“Still some upside could exist should China regain its recovery momentum in H2 23 based off possible stimulus measures for its property sector,” BMI said.
The other factor hovering over the market is the slow but steady expansion of tonnages available on the seaborne market.
Brazil’s Vale, which sparked the last iron ore price run from January 2019 when its Brumadinho dam collapse forced a dramatic slowdown in South American production, is set to lift output from 308Mt in 2022 to 310-320Mt this year.
It is a perennial guidance misser though.
Rio Tinto (ASX:RIO) is aiming to hit nameplate 43Mtpa production this year at its Gudai-Darri mine and finish around the 322Mt mark it hit in 2022.
BHP (ASX:BHP) posted a record half year through December 2022 of 132Mt and is well on track to hit is FY23 guidance of 249-260Mt (with non-BHP owned tonnes the number is higher).
Fortescue (ASX:FMG) meanwhile delivered a record 189Mt in FY22 and is on track for similar numbers in FY23. Its growth is poised to come from the recently opened Iron Bridge magnetite mine, which will eventually ramp up to 22Mtpa, as well as the Belinga project in Gabon.
“On the supply side, we expect production to grow steadily,” BMI said.
“All major producers have kept their production guidance in 2023 as of their Q123 reports.”
Steel prices rose 4% in China over the past month, with MySteel’s composite price hitting US$559/t on June 30, largely on Chinese Government stimulus expectations according to the industry monitor’s chief analyst Wang Jianhua.
But iron ore prices have been less than impressive this week, with Tangshan’s government ordering mills to suspend sintering over the next month, meaning less demand for iron ore.
ASX iron ore stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.011 | 0% | 10% | -56% | -76% | $ 5,204,400.11 |
| ADY | Admiralty Resources. | 0.006 | 0% | 0% | -25% | -40% | $ 7,821,474.92 |
| AKO | Akora Resources | 0.16 | -6% | -18% | -9% | -22% | $ 15,197,250.24 |
| BCK | Brockman Mining Ltd | 0.037 | 16% | 16% | 54% | 19% | $ 343,368,588.85 |
| BHP | BHP Group Limited | 45.2 | 0% | 5% | -2% | 13% | $ 229,279,038,364.56 |
| CIA | Champion Iron Ltd | 5.94 | -3% | -1% | -23% | 14% | $ 3,082,471,030.96 |
| CZR | CZR Resources Ltd | 0.165 | -3% | 0% | -23% | -42% | $ 40,074,889.82 |
| DRE | Dreadnought Resources Ltd | 0.052 | 0% | 2% | -46% | 6% | $ 173,041,867.44 |
| EFE | Eastern Resources | 0.01 | 0% | 0% | -64% | -55% | $ 12,419,464.61 |
| CUF | Cufe Ltd | 0.02 | 43% | 82% | 43% | -9% | $ 17,390,022.57 |
| FEX | Fenix Resources Ltd | 0.29 | 16% | 23% | 18% | -5% | $ 180,736,147.20 |
| FMG | Fortescue Metals Grp | 22.08 | 1% | 12% | 5% | 29% | $ 68,568,548,723.86 |
| FMS | Flinders Mines Ltd | 0.435 | -3% | 5% | 7% | 1% | $ 75,981,859.65 |
| GEN | Genmin | 0.17 | 3% | 10% | -15% | -15% | $ 76,718,149.78 |
| GRR | Grange Resources. | 0.52 | 1% | -3% | -40% | -55% | $ 601,816,122.96 |
| GWR | GWR Group Ltd | 0.07 | 8% | 9% | 24% | -42% | $ 21,521,515.89 |
| HAV | Havilah Resources | 0.225 | 0% | -10% | -29% | -10% | $ 72,827,018.30 |
| HAW | Hawthorn Resources | 0.155 | 11% | 65% | 35% | 89% | $ 51,927,420.02 |
| HIO | Hawsons Iron Ltd | 0.048 | 33% | 30% | -42% | -90% | $ 35,843,771.30 |
| IRD | Iron Road Ltd | 0.075 | -5% | -6% | -38% | -50% | $ 57,289,294.51 |
| JNO | Juno | 0.071 | -13% | 6% | -16% | -41% | $ 9,631,718.07 |
| LCY | Legacy Iron Ore | 0.022 | 10% | 29% | 16% | 22% | $ 134,543,350.18 |
| MAG | Magmatic Resrce Ltd | 0.092 | 12% | -5% | 0% | 53% | $ 27,512,351.82 |
| MDX | Mindax Limited | 0.063 | 2% | -5% | 7% | 7% | $ 137,052,438.26 |
| MGT | Magnetite Mines | 0.4 | 0% | -2% | -33% | -64% | $ 31,144,915.69 |
| MGU | Magnum Mining & Exp | 0.025 | 19% | -4% | 4% | -38% | $ 17,980,095.68 |
| MGX | Mount Gibson Iron | 0.425 | -1% | 4% | -14% | -17% | $ 522,200,313.19 |
| MIN | Mineral Resources. | 72.85 | 3% | 5% | -6% | 59% | $ 14,162,080,496.08 |
| MIO | Macarthur Minerals | 0.17 | -8% | 10% | -3% | -15% | $ 30,682,895.28 |
| PFE | Panteraminerals | 0.087 | -13% | 18% | -24% | -33% | $ 4,480,597.44 |
| PLG | Pearlgullironlimited | 0.03 | 0% | 0% | 25% | -14% | $ 4,692,487.14 |
| RHI | Red Hill Minerals | 4.54 | -2% | 1% | 9% | 42% | $ 298,077,455.83 |
| RIO | Rio Tinto Limited | 114.15 | 0% | 4% | -3% | 13% | $ 42,871,760,554.86 |
| RLC | Reedy Lagoon Corp. | 0.007 | 40% | 17% | -30% | -59% | $ 3,967,037.21 |
| CTN | Catalina Resources | 0.003 | 0% | -14% | -67% | -67% | $ 3,715,460.68 |
| SRK | Strike Resources | 0.072 | 16% | 7% | -20% | -40% | $ 20,146,250.00 |
| SRN | Surefire Rescs NL | 0.015 | 15% | -12% | 36% | -42% | $ 24,770,452.16 |
| TI1 | Tombador Iron | 0.02 | 5% | 0% | -20% | -20% | $ 42,992,147.46 |
| TLM | Talisman Mining | 0.165 | -3% | -8% | 22% | 14% | $ 32,956,061.08 |
| VMS | Venture Minerals | 0.014 | 0% | -13% | -42% | -55% | $ 27,300,182.49 |
| EQN | Equinoxresources | 0.11 | -8% | -15% | -12% | -21% | $ 4,950,000.11 |
| AMD | Arrow Minerals | 0.0035 | 17% | -13% | -22% | 40% | $ 10,583,177.84 |
Coal to fall behind battery metals
Another quarter, another downward facing outlook on energy coal from Canberra’s forecasters, who say the commodity’s export value will fall from $64 billion last year to $38b in 2023-24 and $30b in 2024-25.
That will come on prices coming down from the absolute highs of 2022.
It means by 2025 the combined battery metals suite of lithium, copper, nickel and zinc will pull more in for Australia’s economy than thermal coal, according to the Department of Industry, Science and Resources’ most recent Resources and Energy Quarterly this week.
Real commodity earnings in general are expected to slide from a record $459.5b in FY23 to $389.7b this financial year and $344b in FY25.
It should be said thermal coal prices are not looking awful for those years. US$158/t in FY24 and US$133/t in FY25 are high by historical standards, even if they don’t match the remarkable US$303/t average seen last fiscal year.
Met coal earnings meanwhile are expected to remain strong, coming down from $60b in FY23 to $50b this year and $42b in FY25.
Prices for top quality Aussie coking coal will drop from US$279/t in FY23 to US$241/t this year and US$213/t in FY25, with export volumes of both met and thermal coal expected to rise over the next two years.
While the new Glencore-Tohoku Power contract is almost half of the level reported for 2022-23, it remains well above pre-Covid levels and spot.
“A new coal price contract of US$200 a tonne has been negotiated between Tohoku Electric and Glencore. The new contract covers the 2023–24 Japanese fiscal year, and reflects the sharp drop in coal prices from the peaks of 2022,” department analysts said.
“The contract price is well below the US$395 a tonne recorded for the 2022–23 fiscal year, but also well above the $109.97 negotiated in the year before that.
“The Tohoku Glencore contract price provides an important benchmark for contract price negotiations in the Asian region.”
ASX coal stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | 1 WEEK RETURN % | 1 MONTH RETURN % | 6 MONTH RETURN % | 1 YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.005 | -9% | -23% | -29% | -17% | $ 7,179,494.55 |
| CKA | Cokal Ltd | 0.1 | -9% | -20% | -51% | -38% | $ 124,079,132.70 |
| BCB | Bowen Coal Limited | 0.16 | 10% | -27% | -48% | -30% | $ 337,679,492.96 |
| SVG | Savannah Goldfields | 0.105 | -5% | -28% | -38% | -48% | $ 20,564,085.99 |
| GRX | Greenx Metals Ltd | 1.065 | -4% | 39% | 37% | 461% | $ 283,734,905.34 |
| AKM | Aspire Mining Ltd | 0.073 | 7% | 22% | 4% | -10% | $ 35,534,588.95 |
| AVM | Advance Metals Ltd | 0.007 | 0% | 0% | -13% | -13% | $ 4,119,911.08 |
| AHQ | Allegiance Coal Ltd | 0.013 | 0% | 0% | -69% | -96% | $ 13,063,647.08 |
| YAL | Yancoal Aust Ltd | 4.8 | 9% | 9% | -17% | -6% | $ 6,232,474,142.64 |
| NHC | New Hope Corporation | 4.9 | 3% | 2% | -17% | 36% | $ 4,297,260,265.35 |
| TIG | Tigers Realm Coal | 0.006 | 20% | -25% | -65% | -67% | $ 71,866,863.02 |
| SMR | Stanmore Resources | 2.59 | 1% | 4% | -11% | 36% | $ 2,307,562,583.04 |
| WHC | Whitehaven Coal | 6.92 | 5% | 17% | -24% | 44% | $ 5,664,492,996.76 |
| BRL | Bathurst Res Ltd. | 1.03 | 12% | 10% | 25% | -4% | $ 187,532,584.40 |
| CRN | Coronado Global Res | 1.57 | 3% | 18% | -19% | 6% | $ 2,590,121,012.85 |
| JAL | Jameson Resources | 0.059 | -3% | -21% | -34% | -16% | $ 23,099,154.90 |
| TER | Terracom Ltd | 0.48 | 13% | 1% | -48% | -22% | $ 360,434,805.75 |
| ATU | Atrum Coal Ltd | 0.005 | 0% | 0% | -17% | -14% | $ 6,958,495.86 |
| MCM | Mc Mining Ltd | 0.16 | 19% | 7% | -42% | 68% | $ 63,946,432.32 |
| DBI | Dalrymple Bay | 2.66 | 0% | 3% | 9% | 33% | $ 1,308,810,800.88 |
| AQC | Auspaccoal Ltd | 0.135 | 4% | -7% | -34% | 50% | $ 48,623,533.42 |
