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BHP hits year-to-date share price peak as iron ore reaches $US105/t on China's big dam build and steel cuts
BHP hits year-to-date share price peak as iron ore reaches $US105/t on China's big dam build and steel cuts

West Australian

time2 days ago

  • Business
  • West Australian

BHP hits year-to-date share price peak as iron ore reaches $US105/t on China's big dam build and steel cuts

China's mega-dam build helped spark an iron ore price revival that has lifted shares in Australia's largest mining company to a 2025 high, but Beijing's clampdown on steel mill cannibalisation is stoking uncertainty. Iron ore futures in Singapore jumped $US1.60 per tonne on Tuesday to trade at $US105/t ($161) after leaping over the $US100/t ($153) barrier late last week. This benchmark price has now rallied 11 per cent since touching lows of $US92/t ($141) less than a month ago — defying predictions by local and international banks that the commodity's value drop would below $US90/t ($138) this year. Iron ore's recent price spike has been attributed to China starting construction on the world's biggest hydropower dam in Tibet. The dam, once complete, will reportedly generate the same amount of energy each year as the entire United Kingdom. The $255 billion infrastructure project requires significant volumes of steel and subsequently boosts demand for steel-making ingredient iron ore. Shares in Australia's major iron ore producers have recorded strong gains over the past few trading days and continued the ascent on Tuesday. Stock in BHP, Australia's biggest miner by market value, rose 2.6 per cent to $41.51 —its highest level since December. Rio Tinto finished up 3.4 per cent at $118.32 and Fortescue lifted 3.3 per cent to $17.81. But Commonwealth Bank analyst Vivek Dhar said the Tibet dam breaking ground was 'unlikely' the sole reason iron ore has rebounded beyond $US100/t. 'We continue to attribute most of the price increase to supply‑side reform in the steel sector,' he said. 'These reforms primarily aim to curb 'involution,' whereby intense competition and overcapacity has crushed margins across several industries.' Competition between China's steel mills has eaten into profit margins, jeopardising the steady supply of steel to the Asian powerhouse's key manufacturing and property sectors. This has led Beijing to intervene with orders limiting steel output across China. How this plays out for iron ore in the longer-term is difficult to predict, according to Mr Dhar. Mandated steel output cuts mean mill owners are usually willing to pay a premium for iron ore, but lower output means an iron ore oversupply could then emerge and drag the commodity's price down. Mr Dhar believes the oversupply scenario is likely. 'It is this logic that underpins our view that the recent rally in iron ore prices is unsustainable,' he said. 'It's worth noting that it is possible for supply‑side reform in China's steel sector to result in sustainably higher iron ore prices. We would need to see outdated and unused steel capacity exit the market.' Citi analyst Paul McTaggart echoed Mr Dhar's sentiment. 'Citi remains cautious on this iron ore rebound; steel production cuts in China should favour steel pricing rather than iron ore pricing,' Mr McTaggart told clients. 'However, for now the interest seems to lie with iron ore and its exposed equities.' Mr Dhar said CBA is predicting iron ore will fall to $US95/t by year's end. Australia's biggest bank had originally expected iron ore to sink to $US80/t this year.

Not selling MinRes mining services unit says Mike Grey, with Onslow staying in the black a white-hot focus
Not selling MinRes mining services unit says Mike Grey, with Onslow staying in the black a white-hot focus

West Australian

time26-06-2025

  • Business
  • West Australian

Not selling MinRes mining services unit says Mike Grey, with Onslow staying in the black a white-hot focus

The 'crown jewel' of Mineral Resources is not for sale, according to the man that oversees the division, because keeping it could help the company's flagship mine turn a decent profit even if iron ore crashes below $US60 per tonne. MinRes mining services chief executive Mike Grey shot down speculation a big chunk of the business unit he oversees could be flogged off to ease the company's swelling debt burden. The speculation emerged following a note published by Morgan Stanley this week. 'There's no truth to it all, no truth,' Mr Grey told The West Australian. Director of strategy, Tim Picton, chimed in to say the division – called CSI Mining Services – was the company's 'crown jewel'. 'You don't sell the crown jewel and mining services is the heart of our business and what makes us competitive against the majors,' Mr Picton said. 'We've got no plans to sell any of our assets, except the (mothballed) Yilgarn (iron ore complex).' CSI is the mining services provider at MinRes' majority-owned iron ore and lithium mines, and is also contracted to other operations run by the likes of BHP, Rio Tinto and Gina Rinehart. MinRes' $3.5 billion Onslow Iron project is arguably CSI's most important gig. Onslow is the only mine in the MinRes stable that can generate the meaningful sums of cash required to pay down the company's $5.8 billion debt pile. MinRes reckons its 57 per cent stake in Onslow can bring in annual earnings before interest, tax, depreciation and amortisation of $727 million when the iron ore spot price is $US90/t. The steelmaking commodity is currently at about $US92/t with Australia's big four banks broadly pencilling in the price to fall to $US80/t by the end of the year. MinRes predicts Onslow's break-even price is $US57/t. Mr Picton said this estimate does not include the money raked in from mining services at Onslow, which would push the break-even price 'down a material amount'. But all the estimates are contingent on Onslow Iron running smoothly, and so far, there have been numerous bumps along the road. The biggest bump has been the performance of its haul road that links the Kens Bore mine to the Port of Ashburton. MinRes is spending $230 million to fix and upgrade the road following cyclonic weather earlier this year and a spate of truck rollovers. The company struggled to attract drivers to transport ore along the road and recently had to lower its driver experience requirements while boosting the pay on offer. Mr Grey said those hiring struggles are now behind MinRes. 'The labour side has really stabilised across the supply chain recently which is really good,' he said. 'We're at our peak now with (truck) drivers.' MinRes plans to roll out autonomous trucks with no drivers in the cabs during the latter half of next year.

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