王子复仇记
2015.05.31
五月廾九日澳洲先驱早报刊登了下面的一篇报导:
中国的报复带给必和必拓和力拓一个重击
一共用了六年时间但中国已经击败沃洲二大矿沙石巨头.
于2009年为了贪图中国勃起之钢铁业市场沃州之必和必拓和力拓公司取消每年一算的矿沙石价格改为每天现价, 从 2008年的每吨60元美金提高到2011年的191元,但因中国极需这些原料根本没有谈判能力或话语杈,只好逆来顺受, 因此于2011年该二家公司从中国获得净利129亿和217亿美元.虽然多年来受到不公平合约的待遇,但中国从未忘记和也不可能会原谅,现在这梦睡中之巨人经己醒来,看样子要把跟这二家公司的谈判方式掉转过来.第一是摆脱对这两家公司的依赖,发展与巴西淡水河谷的关系和购买资金困难之沃洲弟三家矿砂石公司 Fortescue.第二以建造大批40万吨运矿砂船队和签署25年租约方式去减低运费, 中国己经达到可以隋心所欲从任何地区进口矿砂石因为沃州的优势已不复存在………
China’s revenge serves body blows to BHP and Rio
It’s taken six years, but China is slowly turning the tables on the heavyweight iron ore miners.
In 2009, iron ore giants BHP Billiton and Rio Tinto decided they wanted to take advantage of China’s soaring demand for iron ore, which was pushing prices ever higher. So they ditched the 40-year old system of setting annual contract prices in favour of using spot pricing for the majority of their iron ore shipped to China from 2010.
Needless to say, China’s steel mills weren’t very happy about that. BHP’s previous CEO Marius Kloppers is widely acknowledged as the man most responsible for bringing about the change. With BHP and Rio filling a huge amount of China’s demand, the steelmakers had little choice but to acquiesce.
The changes, and China’s thirst for iron ore, saw the iron ore price soar as high as US$191 per tonne in February 2011, from around US$60 per tonne in 2008. Rio Tinto produced record underlying earnings of US$15.5 billion in the 2011 financial year, with iron ore contributing US$12.9 billion. BHP, for its part, saw net profit rise 74 per cent to US$21.7 billion as revenues rose 36 per cent.
China may also still be sore over aluminium giant Chinalco’s aborted US$19.5 billion investment in Rio Tinto back in 2010, which was aimed at gaining resource security. At the time, reports suggest Chinese officials feared that China was too vulnerable to both Rio and BHP, even separately. Rio’s board canned the deal, and announced that it was instead forming an iron ore joint venture with BHP. That deal never went ahead – much to the relief of China.
The giant (re)awakens
But China has never forgotten, and appears unlikely to forgive. Now the sleeping giant has awakened, and looks set to turn the tables on Rio and BHP.
Firstly, China needed to loosen its dependence on the two Australian iron ore miners, so it has turned to Brazil’s Vale. For many years Vale was snubbed by the Chinese. The iron ore giant had built a number of very large ore carriers to ship ore to China, but they have been banned from docking at Chinese ports since 2012.
Now, China hasn’t just removed the restrictions but Vale has also sold 4 of the ore carriers to two of China’s biggest shipping companies. Each carrier can transport up to 400,000 tonnes of iron ore, and could reduce Vale’s production costs by as much as 25 per cent, according to some estimates. That would bring Vale’s landed costs around the same as BHP and Rio’s.
Vale also has a 25-year shipping agreement with China Cosco to transport iron ore from Brazil to China. China has gone another step further too, loaning Vale US$4 billion to help fund a US$16.5 billion project, known as S11D.
S11D is expected to produce 90 million tonnes of very high quality iron ore each year, taking Vale’s production to 450 million tonnes of iron ore within the next few years.
In two moves, China has decreased its dependence on BHP and Rio, loosening their control over the iron ore market, and thanks to the increase supply of iron ore, achieved lower prices.
One last dance?
Fairfax Media reports today that Chinese-linked companies have applied to the Foreign Investment Review Board seeking permission for an investment with Australia’s self-styled ‘new force in iron ore’ Fortescue Metals Group.
Fortescue, with its US$7.7 billion in net debt, could strengthen its balance sheet with a capital injection, either to pay down debt in return for an equity stake, or refinance existing debt at lower rates. The miner recently issued US$2.3 billion in senior secured notes, but is paying a whopping 9.75 pe cent interest rate, at a time when interest rates around the world are at record low levels.
Fortescue could struggle to repay its debt load if iron ore prices continue to trade at or under US$60 per tonne, with some estimates putting the miner’s breakeven price around US$70 per tonne. The company may well be amenable to a deal with the Chinese, particularly after the recent kerfuffle over the iron ore inquiry that was going ahead, but was cancelled.
Foolish takeaway
The upshot of all this is that China has gained a big leg up in iron ore pricing, a key ingredient for its key steel making industry. More diversified and ‘friendly’ sources of iron ore may also allow China to close down some of its higher cost iron ore mines without pushing prices up. A huge win for China and body blows to Rio Tinto and BHP.
Source: Sydney Morning Herald
