Director buying at 1.31 - 1.32. No doubt likes the high-value product that his company produces!
Interesting article below:
Iron Ore Price To Remain Elevated Commodities | Feb 02 2018 Rapidly rising Chinese inventories do not portend weaker iron ore prices, given growing demand disparity between low and high grade ore.
-Rising Chinese iron ore inventories misleading
-Demand for high grade ore expected to rise
-Low grade discount could widen further
By Greg Peel
Since October 2016, iron ore inventories at Chinese ports have increased by 43% to a record high, ANZ’s analysts note. Typically, with regard any commodity, rising stockpiles imply falling prices as new demand diminishes.
For the bulk of this century, commodity prices, particularly that of iron ore, have ebbed and flowed in line with China’s typical seasonal restock/destock cycle. Record inventories would normally imply the beginning of a destocking phase, meaning lower new demand and lower prices. But that was before Beijing started clamping down on the Chinese steel industry.
The government has moved to close down older, heavy polluting mills and further to force mill closures during winter, when heating-related pollution is at its peak. The end result is that while inventories may have risen 43%, over the same period the iron ore price has risen 16%. All is Fine
The “iron ore price” specifically implies the price of high-grade, 62% minimum iron content “fines”, which China sources predominantly from Australia and Brazil. Lower grade ore is priced at a discount to the benchmark fines price.
Credit Suisse notes that the steel industry trade press has suggested Chinese mills are switching to lower grade (cheaper) ore as steel prices and margins weaken. However, were this the case, the discount to the fines price for lower grade ore would diminish on stronger low grade demand. But this has not happened. Indeed, the discount has blown out to a record -40%.
Aside from low grade ore not often being sold in the spot market, making true price discovery difficult (Fortescue Metals ((FMG)) does not sell into the spot market, for example), Credit Suisse notes Chinese steel mills already have abundant stockpiles of low grade ore and thus have no need to seek more. As China emerges from the winter and construction ramps up once more, steel prices should rise and margins widen, the analysts suggest.
Mills will thus seek to maximise profit, and to do this they will want to use high grade ore.
But it’s not just about profit. The higher the iron content in the ore, the less processing is required to produce steel, thus less pollution is generated. Beijing’s clampdown on high-polluting steel capacity will continue into 2018 and this will force steelmakers towards high grade ore.
The government’s capacity focus is nevertheless set to shift away from simply closing down heavy-polluting mills to updating and upgrading mill capacity. Smaller inland mills will be replaced by investment in newer, bigger and cleaner mills located on the coast, ANZ notes.
High grade ore arrives by sea.
The bottom line is that forecasting iron ore prices ahead is no longer an exercise of tracking Chinese inventories. The big inventory build-up since 2016 has been mostly in low grade ore. This alone implies ongoing hefty discounts for low grade ore, but add in above reasons why Chinese mills will prefer high grade ore anyway and the conclusion is one of high-grade ore prices continuing to be supported through 2018.
ANZ sees the 62% iron ore price holding around $US70/t in the first half. Risks to this forecast include a ramp-up in high grade supply in response, a deceleration in Chinese construction, or further tightening in Chinese credit markets.
(20min delay)
