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Bulk Buys: Rio off the freakin’ rails and coal spinoff plans facing pressure from multiple angles
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- Rio Tinto suffers third derailment in a year
- But iron ore markets are slow to respond to potential supply disruption with Singapore futures down yesterday
- Coal spinoffs facing investor pressure from two angles
There could be further supply challenges on the cards for Aussie iron ore producers after Rio Tinto (ASX:RIO) suffered a third train derailment in a year.
Reported by the local ABC branch on Monday, the early morning crash comes hot on the heels of another in February and a Fortescue (ASX:FMG) tumble in late December that contributed to a massive drop in output in the March quarter, along with some hairy Pilbara Wet Season weather.
This has become commonplace in recent times up in WA’s north, where most iron ore exports are now carted off to port by robots controlled remotely from operations centres in Perth.
No one was injured, but the Mining and Energy Union said five maintenance workers who managed to vacate a broken down train they were attending to when a mayday signal came down about an imminent crash were shaken.
WA secretary Greg Busson disputed Rio Tinto comments that no one was in the vicinity at the time of the incident.
“If these workers were situated at the rear of the train at the time of the incident, we could have seen fatal outcomes,” he said.
“To say that there were no people in the vicinity of the incident is untrue.
“There were five workers working on the broken-down train while the automated iron ore train was on course to collide with the stationary train.
“While we are thankful that workers were not at the rear of the train and had enough time and space to evacuate, workers have been left disturbed.”
Production impacts?
We’ve put the feelers out to Rio’s media team to see if they expect any production impacts along with the safety aspects of the incident, which the Office of the National Rail Safety Regulator and the Australian Transport Safety Bureau are now investigating.
It remains to be seen what production issues may flow from the incident, which damaged 22 wagons and three locos according to ABC reports.
If there were any external impacts on the iron ore market in the immediate aftermath they didn’t show.
Singapore iron ore prices were down 1.66% in morning trade to US$115.10/t.
Rio’s rail network stretches over 1900km and its capacity far exceeds that of the operations that feed it and the company’s port berths in Dampier and Cape Lambert.
If one railway line is blocked, Rio has the ability to reroute while investigations and cleanup activities progress, depending on the scale and nature of the damage.
Rio expects to produce 323-338Mt this year after shipping 332Mt in 2023, the highest since its record of 338Mt in 2018. In full flight its rail corridors can handle 350-360Mtpa.
READ NOW: In pictures: How Rio has made the world’s biggest iron ore business into a machine
Chinese steel market reinforcements
The China Iron and Steel Association reported steel production running at its highest rate since August last year through the final 10 days of April, up 3.8% on the previous 10 day period.
Though that roughly 2.2Mtpd rate remained down slightly on 2023 numbers. There are signs of steel pricing rising off a floor, with Shagang Group lifting list prices by around US$7/t for the second time in a month.
Steel inventories have also decreased, according to the CISA.
ANZ research said in a note yesterday that demand was picking up in China after a lean few months, which has led to a slow start to what is normally peak construction season in the Middle Kingdom.
“The potential disruption to supply comes as the outlook for demand picks up. China’s increase(d) spending on infrastructure, as well as the loosening of restrictions on residential housing builds should boost demand for steel and iron ore,” analysts said.
Goldman Sachs this month forecast the country’s steel output would fall below 1Bt for the first time since 2019 after four years above the mark, falling from a record 1.065Bt in 2020 to 995Mt this year.
At the same time China’s iron ore imports have been strong, with 411.82Mt delivered to the world’s dominant steelmaker to date this year. According to Reuters columnist Clyde Russell that’s a 7.2% lift on the first four months of 2023.
ASX iron ore stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| ACS | Accent Resources NL | 0.007 | 0% | 0% | -13% | -30% | $ 3,311,890.98 |
| ADY | Admiralty Resources. | 0.014 | 17% | 133% | 133% | 100% | $ 24,442,109.10 |
| AKO | Akora Resources | 0.155 | 0% | 4% | -13% | 12% | $ 15,550,036.02 |
| BCK | Brockman Mining Ltd | 0.023 | 15% | 0% | -21% | -34% | $ 213,445,339.01 |
| BHP | BHP Group Limited | 43.15 | -1% | -5% | -6% | -1% | $ 219,343,707,835.25 |
| CIA | Champion Iron Ltd | 7.21 | 0% | 5% | -7% | 16% | $ 3,714,570,690.42 |
| CZR | CZR Resources Ltd | 0.3 | 0% | 7% | 36% | 71% | $ 69,541,720.57 |
| DRE | Dreadnought Resources Ltd | 0.017 | -6% | -6% | -50% | -68% | $ 63,235,313.28 |
| EFE | Eastern Resources | 0.008 | 14% | 7% | -27% | -33% | $ 8,693,625.23 |
| CUF | Cufe Ltd | 0.021 | 17% | 91% | 75% | 91% | $ 18,337,797.84 |
| FEX | Fenix Resources Ltd | 0.305 | -5% | 9% | 27% | 30% | $ 218,804,644.80 |
| FMG | Fortescue Ltd | 25.81 | -4% | 0% | 6% | 28% | $ 80,207,036,113.90 |
| RHK | Red Hawk Mining Ltd | 0.81 | -6% | 19% | 43% | 89% | $ 169,839,757.15 |
| GEN | Genmin | 0.14 | -18% | 49% | -13% | -7% | $ 95,932,121.04 |
| GRR | Grange Resources. | 0.415 | -3% | -6% | -20% | -27% | $ 486,082,253.16 |
| GWR | GWR Group Ltd | 0.11 | 5% | 10% | 45% | 51% | $ 35,333,832.05 |
| HAV | Havilah Resources | 0.2 | 0% | -13% | -20% | -22% | $ 61,744,645.95 |
| HAW | Hawthorn Resources | 0.067 | -4% | -9% | -32% | -4% | $ 22,446,046.07 |
| HIO | Hawsons Iron Ltd | 0.03 | -6% | -9% | -40% | -36% | $ 30,337,299.89 |
| IRD | Iron Road Ltd | 0.077 | 1% | 4% | 7% | -16% | $ 57,824,478.46 |
| JNO | Juno | 0.055 | -7% | -8% | -31% | -7% | $ 10,006,989.30 |
| LCY | Legacy Iron Ore | 0.016 | 7% | 14% | 0% | 7% | $ 123,416,772.19 |
| MAG | Magmatic Resrce Ltd | 0.097 | -8% | 5% | 35% | -16% | $ 38,163,894.90 |
| MDX | Mindax Limited | 0.028 | -18% | -28% | -44% | -76% | $ 53,268,378.28 |
| MGT | Magnetite Mines | 0.37 | 28% | 40% | 19% | -26% | $ 36,420,774.25 |
| MGU | Magnum Mining & Exp | 0.017 | 21% | 6% | -43% | -29% | $ 13,759,143.85 |
| MGX | Mount Gibson Iron | 0.435 | -2% | -3% | -22% | 2% | $ 528,474,423.86 |
| MIN | Mineral Resources. | 76.32 | -2% | 6% | 28% | 3% | $ 14,972,436,728.55 |
| MIO | Macarthur Minerals | 0.073 | -4% | -14% | -50% | -51% | $ 12,560,510.52 |
| PFE | Panteraminerals | 0.039 | 3% | 3% | -34% | -57% | $ 10,726,663.20 |
| PLG | Pearlgullironlimited | 0.023 | -4% | -23% | -8% | -23% | $ 4,704,461.17 |
| RHI | Red Hill Minerals | 6.1 | -2% | 6% | 36% | 30% | $ 386,615,388.50 |
| RIO | Rio Tinto Limited | 128.12 | -3% | 0% | 5% | 19% | $ 47,901,740,254.56 |
| RLC | Reedy Lagoon Corp. | 0.003 | 0% | -25% | -40% | -56% | $ 1,858,622.20 |
| CTN | Catalina Resources | 0.003 | 0% | 0% | -14% | -25% | $ 3,715,460.68 |
| SRK | Strike Resources | 0.046 | -8% | 5% | -16% | -33% | $ 13,052,500.00 |
| SRN | Surefire Rescs NL | 0.01 | 0% | 0% | 0% | -50% | $ 21,849,385.94 |
| TI1 | Tombador Iron | 0.014 | 0% | 0% | 0% | -35% | $ 30,218,753.22 |
| TLM | Talisman Mining | 0.275 | -2% | 6% | 49% | 62% | $ 51,788,095.98 |
| VMS | Venture Minerals | 0.022 | 16% | -21% | 100% | 22% | $ 49,866,953.44 |
| EQN | Equinoxresources | 0.25 | 19% | 11% | 28% | 108% | $ 23,270,250.69 |
| AMD | Arrow Minerals | 0.004 | 0% | -20% | 300% | -11% | $ 40,557,460.38 |
| CTM | Centaurus Metals Ltd | 0.41 | -2% | 19% | -15% | -45% | $ 202,948,908.17 |
Glencore catches heat on coal plans
Expect commentary from think tanks and activist investors to ramp up if BHP (ASX:BHP) is successful in getting its hands on Anglo American.
The Big Australian saw its target knock back another bid worth $64.5bn it views as undervaluing the London-listed miner. There are also concerns from Anglo’s board about the plan to cut its stakes in Anglo American Platinum and Kumba Iron Ore from the business and give them to Anglo shareholders alone.
BHP views the operations as vestigial organs, with its Anglo plans only centred around the miner’s copper, Brazilian iron ore and coal assets.
Those met coal assets could boost BHP’s share of met coal production from Queensland from 28Mtpa to 44Mtpa (BHP’s current coal mines are run in a 50-50 JV with Japan’s Mitsubishi), and make a coal specific spinoff more attractive when the time is right.
Glencore is trying to pursue the same having announced the majority purchase of Teck’s Elk Valley Resources in Canada last year, but is running into shareholder opposition on two fronts. One side is the generalist investor crowd who don’t want their company to shunt one of its true money spinners.
The other is from think tanks and activist investors concerned a pure play coal miner would get emissions and ESG headaches off Glencore’s hands and stick them into a separate entity with no incentive to wind down fossil fuel production.
IEEFA’s Simon Nicholas argued in a report today that those investors hoping to see Glencore run down its coal mines to reduce global emissions are less likely to see that happen in a pure-play vehicle, citing examples like Anglo’s thermal coal spinoff Thungela Resources.
“Investors are increasingly concerned about a lack of commitment and action to reduce Scope 3
emissions among fossil fuel producers,” he said. “There is also growing acceptance among investors that
divesting coal assets is not the responsible approach to reducing emissions. Some Glencore shareholders have expressed concern about the company’s coal spin-off plan.
“In IEEFA’s view, previous, recent cases of coal divestments to pure-play miners show they are right to be concerned.”
Front month thermal coal futures were trading at US$140.10/t yesterday, with premium hard coking coal at US$250/t.
ASX coal stocks
Scroll or swipe to reveal table. Click headings to sort.
| CODE | COMPANY | PRICE | WEEK RETURN % | MONTH RETURN % | 6 MONTH RETURN % | YEAR RETURN % | MARKET CAP |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.0035 | -13% | -13% | -50% | -30% | $ 6,278,646.19 |
| CKA | Cokal Ltd | 0.105 | 0% | -9% | 0% | -30% | $ 107,894,898.00 |
| BCB | Bowen Coal Limited | 0.063 | 13% | 34% | -32% | -71% | $ 156,420,302.39 |
| SVG | Savannah Goldfields | 0.032 | 14% | 7% | -34% | -79% | $ 9,275,802.23 |
| GRX | Greenx Metals Ltd | 0.86 | 0% | -5% | -9% | 13% | $ 234,942,735.22 |
| AKM | Aspire Mining Ltd | 0.215 | 10% | 8% | 231% | 271% | $ 104,065,581.93 |
| AVM | Advance Metals Ltd | 0.028 | 12% | 4% | -65% | -83% | $ 1,048,747.03 |
| YAL | Yancoal Aust Ltd | 5.89 | 2% | 4% | 22% | 10% | $ 7,962,249,805.11 |
| NHC | New Hope Corporation | 4.69 | 0% | -3% | -11% | -9% | $ 3,998,436,744.72 |
| TIG | Tigers Realm Coal | 0.004 | -20% | -20% | -20% | -33% | $ 65,333,511.84 |
| SMR | Stanmore Resources | 3.21 | -4% | -1% | -13% | 8% | $ 2,956,564,559.52 |
| WHC | Whitehaven Coal | 7.61 | -4% | -1% | 10% | 10% | $ 6,483,656,076.00 |
| BRL | Bathurst Res Ltd. | 0.825 | -1% | -2% | -14% | -17% | $ 161,699,014.10 |
| CRN | Coronado Global Res | 1.145 | -3% | -4% | -27% | -25% | $ 1,911,157,252.20 |
| JAL | Jameson Resources | 0.031 | 0% | 15% | -23% | -59% | $ 13,507,732.98 |
| TER | Terracom Ltd | 0.23 | -4% | -10% | -28% | -64% | $ 184,222,234.05 |
| ATU | Atrum Coal Ltd | 0.004526 | 0% | 0% | 0% | 0% | $ 11,966,853.96 |
| MCM | Mc Mining Ltd | 0.15 | 15% | -3% | -12% | -21% | $ 63,223,065.32 |
| DBI | Dalrymple Bay | 2.91 | 2% | 5% | 4% | 14% | $ 1,432,751,217.63 |
| AQC | Auspaccoal Ltd | 0.094 | -1% | 7% | -28% | -45% | $ 49,757,856.33 |
