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Why the Long-Term Outlook on Iron Ore Prices Is Still Negative (Continued from Prior Part) China crude steel
China accounts for about half of global steel production and is the world’s biggest buyer of seaborne iron ore. Iron ore is the main ingredient in steel manufacturing, and China is the largest producer and consumer of the two commodities.
China’s steel output increased month-over-month by 1.7% to 66.9 million tons. However, the production declined by 3.5% on a year-over-year (or YoY) basis. For the first eight months of the year, the production dropped by 2% to 543 million tons over the same period last year.
Part of the YoY decline is due to the shutdown of some mills in and around the Hebei province to ensure quality air for the military parade to commemorate the World War II anniversary.
Outlook remains negative
According to the China Iron and Steel Association (or CISA), China’s crude steel output could decline by as much as 2% in 2015. This estimate is lower than CISA’s March estimate of a decline of 1.1%. Weaker construction and manufacturing demand are weighing on steel prices, which is leading to lower steel production.
A decrease in China’s crude steel production would impact the iron ore miners engaged in seaborne iron ore trade such as BHP Billiton (BHP) (BBL), Rio Tinto (RIO), Vale SA (VALE), Fortescue Metals Group (FSUGY), and Cliffs Natural Resources (CLF). A production decrease would also affect the iShares MSCI Global Metals & Mining Producers ETF (PICK). All listings of BHP, RIO, VALE, and FSUGY form 34.1% of PICK’s holdings.
To take a broader approach toward investing in the steel sector, consider the SPDR S&P Metals and Mining ETF (XME). Cliffs Natural Resources (CLF) makes up 3.8% of XME’s holdings.
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Companhia Vale Do Rio Doce
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PRODUCER |
CODE : RIO |
ISIN : US7672041008 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Vale do Rio is a copper producing company based in . Vale do Rio produces copper, aluminum, bauxite, iron, manganese, nickel and silica in Brazil, develops coal and copper in Australia and in Brazil, and holds various exploration projects in Brazil and in Peru. Its main assets in production are ALUNORTE, URUCUM MINE, MILTONIA 3, MORRO DA MINA, TAQUARI - VASSOURAS, SOSSEGO MINE, CAPAO XAVIER, CARAJAS, ANDRADE, SAMARCO, CONCEIÇÃO, MINAS DO MIEO, AGUA LIMPIA / CURURU, GONGO SOCO, BRUCUTU, BAU, FABRICA NOVA, FAZENDAO, TIMBOPEDA, CORREGO DO FEIJAO, SEGREDO/JOAO PEREIRA, PICO/SAPECADO/GALINHEIRO, VARGEM GRANDE COMPLEX TAMANDUA, CAPITAO DO MATO, ABOBORAS, PARAOPEBA COMPLEX JANGADA, SERRA NORTE - N4W, SERRA NORTE - N4E, SERRA NORTE - N5-W, SERRA NORTE - N5E, SERRA NORTE - N5E-N, SERRA NORTE - N5S, SERRA LESTE, MILTONIA 5 and MRN (BAUXITE MINING) in Brazil, its main assets in development are BELVEDERE in Australia and SALOBO PROJECT in Brazil and its main exploration properties are SALOBO, MAR AZUL MINE, ONÇA PUMA, PROJECT 118 and VERMELHO in Brazil and CORDILLERA DE LAS MINAS in Peru. |