CISA IRON ORE CONF: Industry waits for a signal from China

Iron ore producers and traders always await the China Iron & Steel Assn (Cisa)'s annual meeting with a degree of anticipation.

Iron ore producers and traders always await the China Iron & Steel Assn (Cisa)’s annual meeting with a degree of anticipation.

This year, with iron ore prices at their most volatile since 2009, delegates will be hanging off the edges of their seats at this week’s meeting in Dalian, northern China, as they listen out for some direction from China’s top steel officials.

Metal Bulletin’s 62% Fe Iron Ore Index plummeted to levels below $90 per tonne at the end of August, a sudden move that shocked many in the market and sparked a wave of project and capital expenditure cuts among the world’s biggest miners, including BHP Billiton and Rio Tinto.

China’s approval of 20 major infrastructure projects earlier in September helped push iron ore prices back above $100 per tonne.

But with the global economic outlook remaining grim and Chinese steel demand not showing any signs of a real recovery, few industry participants are willing to take any bets on iron ore prices moving back up to levels of $150 per tonne in the near future.

For many, it is a question of not if, but when prices will start to drop again.

Iron ore producers will be listening carefully to Cisa’s price predictions for the next year. Many were surprised when Cisa said it expected prices to range between $110-130 per tonne back in February.

Will Cisa now predict lower prices for 2013?

It is not just Chinese mills who will get the opportunity to give their opinion on the state of the market. Many of the world’s largest mining houses will also be represented.

Jose Carlos Martins, director of ferrous and strategy at Vale, which sponsored the opening night’s lavish entertainment, may shed some light on Vale’s plans for coping with the drop in iron ore demand.

The Brazilian miner is expected to follow fellow major iron ore miners BHP Billiton and Rio Tinto in divesting non-core assets, but is yet to announce any major cutbacks.

Delegates are also eager to hear from Fortescue Metals Group (FMG) ceo Nev Power.

The Australian miner saw share prices dive as falling iron ore prices highlighted the ambitious iron ore producer’s debt issues. This prompted a downgrading of the miner’s status by ratings agency Standard & Poor’s earlier this month.

FMG has secured financing for its loans but has cut back its output expansion plans by some 40 million tonnes.

The industry will be listening closely to hear if Power announces any further cuts. 

Michelle Madsen
Twitter: @mmadsen_SF