BHP Defends Iron Strategy as Good for Australia Amid Surplus

BHP Defends Iron Strategy as Good for Australia Amid Surplus


BHP Billiton Ltd., the world’s largest mining company, defended its strategy of boosting iron ore supplies at a time of falling prices, saying a focus on raising output and efficiency was aiding Australia’s competitiveness.

Production from its operations in Western Australia was a record 124 million metric tons in the first half, and may reach 245 million tons in the 2015 financial year, BHP said in a statement on Tuesday as Jimmy Wilson, head of its iron ore business, addressed a conference in Perth. The company is on track to achieve unit cash costs below $20 a ton, BHP said.

“With this strategy, we are maintaining Australia’s competitive position in the global market and providing the revenue, royalties, employment and innovation that is so important for this country’s future,” said Wilson.

Iron ore sank 47 percent in 2014 and extended losses this year as surging low-cost supplies from BHP, Rio Tinto Group and Fortescue Metals Group Ltd., Australia’s top producers, outpaced demand growth, spurring a surplus just as China slowed. The slump hurt government revenues in Australia, the world’s biggest shipper, while squeezing smaller producers. Iron ore may find a floor at about $50 a ton, Citigroup Inc. told the conference.

“We have no major projects in execution and our growth pathway will be achieved by continuing to make our existing infrastructure more productive,” said Wilson. BHP anticipated the increased supply of seaborne ore and approved the last of its major capital investments in the Pilbara in 2011, it said.

Lower Prices

Ore with 62 percent content at Qingdao fell 1.5 percent to $58.58 a dry ton on Monday, declining for a fifth day, according to data from Metal Bulletin Ltd. That’s the lowest price since at least May 2008, when Metal Bulletin started compiling weekly prices. The commodity is 18 percent lower this year.

“Is there any chance the major producers will reassess and downgrade their plans, given where the price is? We think not,” Laura Brooks, a senior consultant at CRU Group, told the conference. “One reason for this is that competitive pressure is driving producers to seek cost reductions, and volume is critical if unit costs are to be cut.”

Rio Chief Executive Officer Sam Walsh said last month that if his company reduced output, forfeited supply would be made up by higher-cost competitors, adding that producers made decisions independently. The London-based company, which mines in the ore-rich Pilbara region, is on track to deliver 330 million tons of output by 2015 and 350 million tons by 2017, Iron Ore Chief Executive Andrew Harding said at the at conference.

Rio’s View

“The broader Pilbara shows that from January 2011 to December 2014 inclusive, 248 million new tons entered the market from Rio Tinto, BHP Billiton and FMG,” Harding said. Of that increase, “Rio Tinto accounted for 63 million tons, or 25 percent. As you know, some would like you to believe that Rio Tinto has had the largest volume increase in that time. But as you can see, this is simply not the case.”

The global surplus will surge to 437 million tons in 2018 from 184 million tons this year, Morgan Stanley said on Feb. 22. Global seaborne supply is projected to increase 4.6 percent in 2015, topping the 3 percent growth in demand, according to the bank, which sees iron ore averaging $79 a ton this year.

There’s a floor for prices at about $50 a ton, Citigroup Iron Ore & Steel Head Mark Lyons said at the conference. At current prices, an estimated 38 percent of global output isn’t generating cash, according to CRU

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Iron Ore Won't Rebound Any Time Soon

Why Iron Ore Won't Rebound Any Time Soon

Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day.

"The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore prices will continue to drift lower," said Caroline Bain, an analyst at Capital Economics, in a note Monday. She forecasts iron ore prices at $60 a tonne by year-end, with risks to the downside. Iron ore touched a more than five-year low Monday of around $63.30 a tonne, although some forward contracts are already pricing it under $60.

Output has picked up over the past few years, encouraged by expectations China demand would continue to post strong growth and by low production costs in Australia and Brazil, she said. She noted Rio Tinto and BHP Billiton put their average production cost in Pilbara, where most of Australia's iron-ore production is located, at around $25 a tonne, compared with 2010-13 average market prices at $145 a tonne. Even at current prices, these producers are still profitable, Bain noted. Australia is the world's second-largest iron-ore producer after China.

Despite 2014's around 50 percent decline in iron ore prices, the big four producers -- Vale (Sao Paulo Stock Exchange: VALE'A-BR), Rio Tinto, BHP Billiton and Fortescue (ASX:FMG-AU) - continue to expand production and other companies are also bringing projects on line this year, she said, forecasting Australian production will rise 6 percent this year, although that's down from 2014's 20 percent rise.

Don't count on China

At the same time, despite China producers' higher costs and lower ore grades, production there isn't likely to see much slowdown, especially as many steel plants have "vertically integrated" operations, owning mines nearby, Bain said. Closures on the mainland are likely to focus on less efficient operations, leading to a leaner and meaner industry there, she said.

"The multinational producers will be only partially successful in their bid to oust higher-cost producers globally and oversupply will continue to weigh on prices," she said. At the same time, China's iron ore usage will stagnate at best, hit by a combination of high inventories and lower demand to use the metal as part of financing deals, she said.

Goldman Sachs also expects iron ore producers won't be able to count on China for growth, noting it's become a mature market.

"The decade-long love affair between China and iron ore is cooling. Chinese steel consumption has increased to unsustainable levels and is bound to decline," it said in a note Friday. "Significant overinvestment to date will ensure that the market is well supplied."

It expects a "long war of attrition" will be needed to balance the market, cutting its long-term price forecast by 25 percent to $60 a tonne.

The Oil Effect

Falling oil prices are also set to weigh on iron ore prices, as they result in "substantial cost reductions", and commodity prices are likely to fall to meet these new lower levels, Citigroup said in a note Monday.

It's also concerned about oil-fueled deflationary pressures affecting commodity demand. 

"Falling prices increase the real cost of debt repayments and could see increased defaults. This not only affects direct commodity demand, but also drives lower inventories and threatens commodity financing trade," it said, noting that falling commodity prices also leave companies with little incentive to build up inventories.

In a note earlier this month, the bank cut its 2015 iron ore price forecast to $58 a tonne from $65

BHP Ramps Up Iron Ore, Petroleum Production Despite Price Slumps

BHP Ramps Up Iron Ore, Petroleum Production Despite Price Slumps

BHP Billiton says it has raised group production by 9 per cent in the December half year, despite slumping prices for its key commodities.

For the 2014 December quarter BHP Billiton lifted iron ore output by 16 per cent compared with the same period a year earlier to 56.4 million tonnes.

That compares with a 12 per cent rise in Rio Tinto's output over the same period, announced yesterday, although Rio remains the bigger producer.

Both companies have lifted output over the past year despite a dramatic slump in benchmark iron ore spot prices in China from around $US135 a tonne in early 2014 to less than $US70 a tonne at the end of last year.

The benchmark Tianjin spot price was at $US67.40 yesterday.

BHP Billiton says cost cuts, some of which are related to the scale associated with extra capacity, are offsetting some of the price declines.

"We are reducing costs and improving both operating and capital productivity across the group faster than originally planned," said the company's chief executive Andrew Mackenzie.

"These improvements will help mitigate some of the impact of lower commodity prices and we remain alert to opportunities to further increase free cash flow."

While iron ore prices have fallen fast, crude oil prices have fallen faster still.

Despite this, BHP Billiton's December quarter petroleum production was 10 per cent higher than the same period a year earlier, although it was 6 per cent down on the September quarter of 2014.

Mr Mackenzie said that BHP Billiton is already cutting back its planned US petroleum investments in response to oil prices which have more than halved from their 2014 peaks.

"We have moved quickly in response to lower prices and will reduce the number of rigs we operate in our onshore US business by approximately 40 per cent by the end of this financial year," he noted in the report.

"Our ongoing shale investment program will remain focused on our liquids-rich Black Hawk acreage. However, we will keep this activity under review and make further changes if we believe defer ring development will create more value than near-term production."

Elsewhere in its portfolio of mines, BHP revealed that metallurgical coal production was up 17 per cent compared to the December quarter a year before.

Energy coal used in power stations saw a 5 per cent rise in output.

Copper production fell 4 per cent in the December quarter compared with a year earlier, alumina was 3 per cent higher, aluminium 15 per cent down and nickel 10 per cent lower.

Despite weak prospects for any price recovery in the short term, BHP Billiton said it is on track to increase petroleum and copper output by 5 per cent this financial year, iron ore by 11 per cent and steel making metallurgical coal by 4 per cent.

Eight Valuable Coins That May Be Hiding in Your Change

Take a closer look before you dump that handful of pennies and nickels into the tip jar — you don't need to find a Revolutionary War-era coin to make a fortune from your change.

They're harder to find each year, but there are several valuable coins floating around that aren't all that old.

They're often valuable for vastly different reasons — like the World War II-era coins minted from atypical metals, or double-printed pennies — but each one is easy to miss if you're not paying attention.

1. 2004 Wisconsin State Quarter With Extra Leaf
Value: Up to $300

Find an average Wisconsin state quarter from 2004, and that will get you one-fourth of a bag of chips. Find one with either the high or low leaf error, and you can get a whole lot more.

The 50 State Quarters Series ran from 1999 until 2008, with special designs representing each state. Wisconsin's quarter came out in 2004; the reverse design features a cow, a wheel of cheese and a partially husked ear of corn lurking in the back.




2. 1995 Double Die Penny
Value: $20 - $50



IMAGE: LINCOLN CENTRE RESOURCE



IMAGE: LINCOLN CENTRE RESOURCE

This penny has a double-printed obverse (heads side) that makes the "LIBERTY" and "IN GOD WE TRUST" look blurry. The error has happened before, in 1969 and 1972, and those versions of the coins are much more valuable.

3. 1942-1945 Silver Nickel
Value: 56 cents - $12.25

During World War II, the United States needed to save as much nickel as possible for military uses. Consequently, it started minting nickels made of 35% silver.

Melting down pennies and nickels is a federal offense, but the coin might still fetch you enough for a decent lunch, if it's in good condition.

4. 1943 Steel Penny
Value: 45 cents - $10





Pennies were made from steel in 1943 only.

Pennies were made from steel during wartime, for the same reasons nickels were made partially from silver — steel pennies helped preserve copper for World War II. However, the switch only lasted one year.

5. Ben Franklin Half-Dollar
Value: $12 - $125





Easy to notice, but hard to find.

In 1948, the U.S. mint began circulating half-dollar coins with images of Ben Franklin and an eagle — which is funny, considering Franklin opposed the bald eagle's nomination as the nation's bird, in favor of a wild turkey.

Franklin's portrait on the coin was replaced by John F. Kennedy in 1964, following the president's 1963 assassination.

6. 1932-1964 Silver Quarter
Value: $7 - $65

Between 1932 and 1964, quarters were 90% silver and 10% copper. These silver quarters look like any pre-state quarter 25-cent piece, but are worth a lot more if they're in the right condition.

7. 'In God We Rust' 2005 Kansas State Quarter
Value: Up to $100



Remember: Always clean your machine.

While it might seem like a mint employee's rogue political statement, these coins are actually just the result of grease preventing a clean pressing.

8. Presidential Dollar Coin with Lettering Errors
Value: $20 - $45



These Washington dollars are missing key inscriptions.

IMAGE: NGC

In 2007, the U.S. Mint began printing a series of dollar coins featuring presidents. Many of the early coins, especially those with George Washington, have errant or missing lettering along the edge of the coin.

Various Copper Bullion Art Bars 1oz, 10 gram and 5 gram Ingots

Various Copper Bullion Art Bars 1oz, 10 gram and 5 gram Ingots

2011 Copper 1 oz Globe & Gears - Base Metal Bullion

2011 Globe & Gears One (Avoirdupois) Ounce Copper Bullion Round

Specifications:

Condition: Uncirculated
Finish: Bullion-Quality
Material: 999 Fine Copper
Product Size: 39 mm
Product Year: 2011
Weight: 1 av oz / 28.35 gr

Celebrate Australia Kakadu National Park – World Heritage Sites 2012 $1 Coin - Perth Mint

This beautiful Celebrate Australia release is one of five 2012 $1 coins portraying stunning Australian landscapes and marine environments inscribed on the World Heritage List.

Kakadu National Park Reverse

Struck from aluminium bronze, the coin’s coloured reverse represents Kakadu National Park’s primordial scenery, including a river scene featuring the White Snowflake Water Lily and a Black Necked Stork.

‘P’ Mintmark

The coin’s reverse design also incorporates The Perth Mint’s ‘P’ mintmark.

Australian Legal Tender

Issued as legal tender under the Australian Currency Act 1965, the coin bears the Ian Rank-Broadley effigy of Her Majesty Queen Elizabeth II on the obverse.

Eye-Catching Presentation Card and Display Folded

The individual coin is housed on an eye-catching presentation card, which has a fold-out stand for upright display.

Five-Coin Collection

All coins in the five-coin collection are housed in a great folder to help display and protect your coins. Other Australian Heritage Sites included in the collection are the Lord Howe Island Group, Fraser Island, Uluru-Kata Tjuta National Park and the Wallandra Lakes Region.

• World Heritage Site Design
• Kakadu National Park Reverse
• ‘P’ Mintmark
• Australian Legal Tender
• Eye-Catching Presentation Card
• Available Individually or in a Five-Coin Collection with Bonus Album