big 4 have played the market very stupid imo- the opposite of OPEC- allowing china to set prices til somewhere from 2002 to 2008 thus ore only 10-14/ton til 2002
and due to insatiable unbelievable greed are flooding the market w supply- purposefully trying to lower prices to push out competitors,esp the huge domestic chinese production-but figures below show the foolishness of that approach imo
bold emphasis added
from macrobusiness.com
More sell side iron ore myopia
Posted by Houses and Holes in Commodities, Iron ore price at 1:13pm on September 2, 2014 | 19 comments
From Gina’s iron ore newsletter today:
JPMorgan argues the focus on this deal risks over-shadowing one of the mining giant’s most important recent developments, its expanded iron ore production in Western Australia.
…Although JPMorgan has not lifted its rating on the stock, it has outlined a bullish scenario for the company’s WA iron ore business, calculating total export volumes could soar to 310 million tonnes per annum (Mtpa).
…The bank is also impressed by the potential returns from the US$3.2 billion expansion, pointing out that the internal rate of return (IRR) is likely to rise to 21 per cent and may head higher given that some of this cash may already been spent.
And I’ll say the same thing of JPM that I said to UBS:
225mt at $90 per tonne is $9 billion profit
310mt at $80 per tonne is $9.3 billion profit
310mt at $70 per tonne is $6.2 billion profit
The potential margin squeeze is much more damaging than the potential volume growth and when the iron ore price falls to its new equilibrium level then ROE will get smashed.
and due to insatiable unbelievable greed are flooding the market w supply- purposefully trying to lower prices to push out competitors,esp the huge domestic chinese production-but figures below show the foolishness of that approach imo
bold emphasis added
from macrobusiness.com
More sell side iron ore myopia
Posted by Houses and Holes in Commodities, Iron ore price at 1:13pm on September 2, 2014 | 19 comments
From Gina’s iron ore newsletter today:
JPMorgan argues the focus on this deal risks over-shadowing one of the mining giant’s most important recent developments, its expanded iron ore production in Western Australia.
…Although JPMorgan has not lifted its rating on the stock, it has outlined a bullish scenario for the company’s WA iron ore business, calculating total export volumes could soar to 310 million tonnes per annum (Mtpa).
…The bank is also impressed by the potential returns from the US$3.2 billion expansion, pointing out that the internal rate of return (IRR) is likely to rise to 21 per cent and may head higher given that some of this cash may already been spent.
And I’ll say the same thing of JPM that I said to UBS:
225mt at $90 per tonne is $9 billion profit
310mt at $80 per tonne is $9.3 billion profit
310mt at $70 per tonne is $6.2 billion profit
The potential margin squeeze is much more damaging than the potential volume growth and when the iron ore price falls to its new equilibrium level then ROE will get smashed.
