Iron Ore Mine Re-opens

- August 12th, 2009

By Kishori Krishnan Exclusive To Iron Investing News
Its open sesame for Western Labrador business owners who are celebrating the reopening Monday of the Labrador City iron ore mine. The Iron Ore Company of Canada (IOC) shut it down for five weeks this summer after iron ore prices plummeted.
Many mine workers left the area while the […]

By Kishori Krishnan Exclusive To Iron Investing NewsIron ore mine re-opens

Its open sesame for Western Labrador business owners who are celebrating the reopening Monday of the Labrador City iron ore mine. The Iron Ore Company of Canada (IOC) shut it down for five weeks this summer after iron ore prices plummeted.

Many mine workers left the area while the mine was closed. Local businesses took a big hit. “We had five hard weeks. It was very slow, extremely slow, but this afternoon there seems to be more people around than what we have seen over the past five weeks,” said Linda Park, manager of the Carol Wabush Co-op. But while the economy is showing signs of turning around, IOC says it’s still too soon to consider restarting the mine’s nearly $1-billion expansion project that was being discussed last year.

Iron ore prices dropped because two of IOC’s main purchasers, China and the U.S. auto industry, bought less ore to make steel during the recession. Any which way, back to business is always good news.

Arrested

In an ongoing saga, four Rio Tinto employees were officially arrested Tuesday, by the Chinese government, on being charged with trade secret infringement and bribery. The charges are a notch lower from the earlier espionage charges in a case that has considerably strained ties with Australia, a key trading partner.

Allaying fears, China’s vice minister of commerce Fu Ziying said that the Rio Tinto case “will not and should not hurt trade and economic ties between China and Australia. This will not hurt China’s efforts in terms of attracting foreign direct investment (FDI)” and would “benefit China’s attraction of FDI.”

London and Melbourne-based Rio Tinto has long denied the allegations. The company has also demanded its employees have access to a lawyer.

Getting around the stalled talks, Chinese steel mills had started buying more iron ore from Brazil and India, although Rio Tinto and BHP Billiton have denied reports they are selling less iron ore to China and say it is “business as usual”

Iron prices

China’s iron ore prices talks had thrown up a lot of dirt this year. The small steel mill owners are often the forgotten victims of the failure in recent months of the China Iron and Steel Association (CISA) to reach an agreement with the big iron ore producers: the Australian mining company Rio Tinto, the British-Australian BHP Billiton and Brazilian company Vale.

Small mills have been left trying to get iron ore at any price, often at inflated levels, from the traders and big steel producers. While China’s dispute with the international mining companies raged in boardrooms around the world, they still had steel mills to fire up.

Rizhao International Iron Ore Trading Center, located on the fourth floor of China Construction Bank in a development zone in the Shandong port city, was opened in May by three local iron ore traders, Huaxin Gongmao, Wanbao and Zhongrui, as well as two e-commerce companies.

The deal was seen as an attempt to get price information for the smaller steel companies that were without their own import licences. This, even as China bought record volumes of oil and iron ore in July as automakers, steel producers and builders expanded output to meet rising demand driven by the nation’s $586 billion stimulus spending.

Imports

Oil imports jumped 18 per cent to 19.6 million metric tons, and iron ore purchases rose 5 per cent to 58.1 million tons from a month ago, the Beijing-based customs said on its Web site. The second-largest energy user and biggest iron ore buyer spent a combined $13.8 billion on the commodities.

Rio Tinto Group, the world’s second-largest exporter of iron ore, is seeing strong demand driven by China and its operations are running “flat out,” Sam Walsh, head of the business, said in Melbourne.

Steel revival

Crude steel production in China, the world’s biggest maker, surged 13 per cent last month to 50.7 million tons, the National Bureau of Statistics also said in Beijing. That’s the third consecutive record monthly high, according to Bloomberg data. Iron ore is used in steelmaking.

“Iron ore restocking pushed up the imports and prices as the stimulus package drives up steel demand,” said Helen Wang, a Shanghai-based analyst with DBS Vickers Hong Kong Ltd., “Steelmakers have the motivation to ramp up production with higher steel prices.”

Iron ore inventories at China’s major ports have risen 29 per cent to 75.2 million tons on August 7, reaching the highest since a record 75.5 million tons last September, according to figures from the Beijing Antaike Information Development Co.

“Total demand has increased and China has got to import to fill the incremental demand growth,” said Henry Liu of Macquarie Bank in Shanghai.

China imported 58.08 million tonnes of iron ore in July, the highest monthly volume on record and up 31.8 per cent from the same period last year, the country’s customs authority said on Tuesday.

The China Iron and Steel Association CISA has attempted to cajole traders and small mills into cutting iron ore imports, in a bid to bolster its position during protracted contract price talks with foreign miners Rio Tinto (RIO.AX)(RIO.L), BHP Billiton (BHP.AX) and Vale (VALE5.SA).

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