CHINA’S STRONG POSITION BY IRON ORE IMPORTS

Cliffs natural resources (CLF) is Among the four big High yield investments companies has the highest exposure to iron ore i.e. 85% of the revenue, and Cliffs natural resources (CLF) were up at 1,7%. Valve has the second highest revenue exposure to iron ore with 54% of revenue followed by Rio and BHP with 42% revenue and 31% of the revenue respectively. The country that produces and consumes iron ore the most in the world is China. When data for Chinese iron ore consumption came out, prices increased by 20 cents to $130.4 per ton. The prices of iron ore have not been higher in the past 4 months so the profits will be made for iron ore miners like Vale, Rio, BHP and Cliffs natural resources (CLF).

Chinese market is growing at a fast pace, reason behind this high yield investments by china, is the demand of products is also increasing. China is a global leader in manufacturing similarly it is the major producer of the steel worldwide. It was recorded that china produced more than 65 million tons which tops the production of steel ever. The main reason for the increase in demand for iron ore is the increase in demand of steel in the construction and automobile industry. Chinas consumption of iron ore is increasing due to increase in construction activity with the hike of 15% in one year. Also the automobile industry’s exhibiting increase in manufacturing of 1.9 million units.

In the last quarter of the year 2013, Morgan Stanley estimates the high yield investments of four big companies & iron ore prices to 125$ average per ton and when the supply will increase in 2014, the prices are expected to fall below 120$ per ton. It is expected by many analysts that the prices of iron ore, due to supply gut will stay below current levels.

Goldman Sachs is expecting increase in supply leading to price expectation of around $80 per ton by 2015 similarly Citi group expects that iron ore will be traded at $115 per ton in 4QFY13. China iron ore stocks have been declining for some time but the weekly iron ore inventory has started to pick up in the recent time. Weekly iron ore inventory has increase 7% YOY and the inventory levels are at 80.9 million tons. Because of the record levels of steel production, restocking activity is soon to be expected. The Baltics dry index, which is an indicator of iron ore prices, indicated the change in raw material transportation cost. The Baltic dry index also predicted that increasing freight rates can show the growth in the demand for iron ore due to the rise in the global economy. The index shows the growth in YoY by 133% and Capezise vessels growth is more than 117% Yoy.