The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: US iron-ore market is a distinct business…

per #msg-107504583 .. As has been discussed on this board ad nauseum, the US iron-ore market is a distinct business, where the proximity of mines to non-coastal steel making companies ensures a cost advantage for North American producers.

Location, hence reduced transport costs, is indeed an important reason that CLF’s US iron ore business is somewhat shielded from the seaborne trade.

However, it is important to note that CLF’s US iron ore is shipped as pellets. CLF's customers utilizing blasts furnaces desire pellets over iron ore fines because of their uniformity and the fact that the pellets enhance air flow during smelting. Pellets are sold at a premium (generally about 30% higher than the price realized for 62% fines (see: http://www.infomine.com/investment/metal-prices/iron-ore-pellets/1-year/ ).

The seaborne trade is heavily weighted towards shipment of iron ore fines and lump. And, the discussion of overcapacity generally focuses upon production of iron ore fines used heavily in China sintering plants. The forecasts for capacity increases in pellet production are more constrained (see: http://pg.jrj.com.cn/acc/Res/CN_RES/INDUS/2014/3/3/26c848fe-8a0d-487b-b8ec-01040f96af8f.pdf pg 10-11).