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Iron Ore Price

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J12
Frequent Contributor
Given the massive drop in iron ore miners today and over the last few years, I'd like to hear what some of your views are on the iron ore price. Anyone want to guess a low? What is the potential to lower production costs? When do you think the price will turn? etc. Also, where would future demand come from and do you think supply or demand will cause the price to increase. Personally, I think the price will probably languish around the $40 per tonne level for some time until the high cost producers are removed. I'm not sure what the prospects for Kumba are. I wonder if they will cut their final dividend to preserve cash. What are the costs of production for Kumba and how low can they cut costs? From what I gather, it's very difficult to reduce costs below $40 per tonne, but I've seen reports stating that some producers are aiming for $10-$15 per tonne. Is this even possible? Could it be a scare tactic?
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52 REPLIES 52
Preston
Super Contributor
IDC owns 13% of KIO. IDC also expect to setup a steel mill in the near future , where the input/raw material i.e iron ore will be converted into a finished product which will then be sold.
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Preston
Super Contributor
I have also read (stand corrected) that shipping cost to china is one of the major drag factor on their overall cost. With the IDC project, that will effectively reduce/eliminate that cost factor thus reducing the overall cost of KIO production.
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Preston
Super Contributor
I have also read (stand corrected) that shipping cost to china is one of the major drag factor on their overall cost. With the IDC project, that will effectively reduce/eliminate that cost factor thus reducing the overall cost of KIO production.
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Preston
Super Contributor
As for the current share price, it is no where near to KIO instrinic value. It is well documented that there is an incredible amount of individuals who is short on this stock and the current share price is indication of trading activity rather than its instrinic share price.
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SimonPB
Valued Contributor
div for year end will most certaily go to zero .. IDC would love to set up a steel mill, but problem is we have two local steel co's in deep deep trouble, why start a third ?
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SimonPB
Valued Contributor
div for year end will most certaily go to zero .. IDC would love to set up a steel mill, but problem is we have two local steel co's in deep deep trouble, why start a third ?
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SimonPB
Valued Contributor
div for year end will most certaily go to zero .. IDC would love to set up a steel mill, but problem is we have two local steel co's in deep deep trouble, why start a third ?
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Preston
Super Contributor
1. Protecting their interest in KIO 2. Protecting possible retrenchment in both industries, iron oreand steel industry Simon, this is very strategic decision of the IDC.
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SimonPB
Valued Contributor
sure on both .. but who are they going to sell the steel to ?? an why not just buy evraz or acl ?
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Preston
Super Contributor
Seriously Simon, now you want me to do your homework for you. Firstly, Acl employs 8713 employees, KIO employ 14040 employees. Secondly, IDC hold 7% in ACL and Holds 11% in Kio.
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Preston
Super Contributor
Seriously Simon, now you want me to do your homework for you. Firstly, Acl employs 8713 employees, KIO employ 14040 employees. Secondly, IDC hold 7% in ACL and Holds 11% in Kio.
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Preston
Super Contributor
Seriously Simon, now you want me to do your homework for you. Firstly, Acl employs 8713 employees, KIO employ 14040 employees. Secondly, IDC hold 7% in ACL and Holds 11% in Kio.
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SimonPB
Valued Contributor
so what ?? how much does a steel mill cost to build and how long ?? and then the issue remains, who do you sell the steel to, coz right now the market for steel is dead .. so it is not going to save KIO as they won't be making any steel hence ot using any iron ore nor will they be employing any staff as they won't be making any steel ..

so answer the initial Q, who do they sell their steel to ??

the iron ore issue can not be resolved by the IDC or any other small grouping, it requires either massive demand uptick (not happening) or massive supply reduction, this will happen, eventually
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SimonPB
Valued Contributor
an who do they sell the steel to ?? I out, time for surf
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Preston
Super Contributor
Simon, raw material (iron ore) ----> production(steel, Finished good----> then sell to China. 2) In economic downturn, you manage cost, eliminate transport cost from KIO total cost of production = chance of surviving many headwinds. 3) transfer price plus it role in GDP definition. Has the penny finally dropped Simon?
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Preston
Super Contributor
Simon, raw material (iron ore) ----> production(steel, Finished good----> then sell to China. 2) In economic downturn, you manage cost, eliminate transport cost from KIO total cost of production = chance of surviving many headwinds. 3) transfer price plus it role in GDP definition. Has the penny finally dropped Simon?
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SimonPB
Valued Contributor
china is an exporter of steel, why are they importing our steel ? again my Q, which you haven't yet answered, who buys the steel? coz it is not china or local SA industry . so must be somebody else, but who ?

preston, you're talking your book, totally expected, we all are .. but don't expect me to buy into it
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Rams
Super Contributor
Preston, you still holding ACL
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