LSteel 9881 is the only company in Bursa which dealing with iron ore business.
The following will be extraction from 2018 report giving an impression the Group is optimism to their Iron Ore Business.
Extract from 2018 Financial Report....
Trading and Processing of Minerals Segment
The Group’s trading and processing of minerals segment focuses on
export of steel-making related minerals, mainly in manganese ore.
The minerals segment recorded revenue of RM56.8 million in FY2018
compared to RM40.5 million in FY2017. The increase in revenue is mainly
attributed to improved manganese ore market price. On average in FY2018,
10,000MT of minerals is exported monthly to the world’s largest steel
producing country, China. The segment’s strategies are geared towards
expanding the export market and cost control.
Iron ore price increased drastically following speculations of supply
shortage resulted from Vale’s Brazilian mine accident and subsequent
closure in January 2019. Several mining players including Rio Tinto,
BHP, and Fortescue have expressed that they have no additional capacity
to meet the gap left by Vale’s mine closure, thus we are bracing for the
possibility of raw material shortage. We expect manganese ore
deliveries in our minerals segment would continue its measured growth.
2019 Outlook
From November 2018 to March 2019, steel mills in mainland China had
cut production to improve air quality, and are expected to resume
production in April 2019. In the short term, there is a likely iron ore
supply shortage resulted from Vale’s Brazilian mine closure. Barring any
external shock such as global slowdown and given that demand for steel
products continue to maintain stable growth, profit margin should
improve. Our trading and processing of minerals segment is expected to
continue its measured growth.
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Today 18-5-19, the iron ore price surge to USD100 a ton, this is
compatible the group forecast. The rising price will further stimulus
the revenue of FY2019 to RM67.2 Million ie. increase of 20%. The profit
of trading iron ore will rise in tandem with increase in revenue and
expecting contribute with 6.7 million ie 10% of revenue.
Extract from Forces news dated 17-5-19
Steel Production Record Reached In China, Helping Drive Iron Ore Closer To $100 A Ton by Forces
A supply squeeze caused by mine
closures in Brazil is not the only reason iron ore rose this week to a
five-year high of $97.95 a ton. Demand is also a factor, with Chinese
steel production running at a record annualized rate of more than one
billion tonnes for the first time.
The combination of Brazil’s problems
and surprisingly strong Chinese steel production during a trade war with
the U.S. could soon see the iron ore price move back above $100/t, and
stay there for some time.
Analysts at J.P. Morgan, an investment
bank, are the first to note the record rate of Chinese steel production
which reached 85 million tons in April, for an annualized 1035m/t, up
11% year-on-year.
China’s steel mills are operating at record levels. Phoptographer: Qilai Shen/Bloomberg.
© 2017 BLOOMBERG FINANCE LP“Chinese steel production is surprising on the upside at a time when iron ore shipments remain materially impacted by supply disruptions in Brazil, and to a lesser extent Australia,” the bank said.
“In our view iron ore prices are likely
to remain well supported over the next three-to-six months. The key
downside remains potential Chinese domestic supply restarts.”
More Problems In Brazil
Those comments were made before more problems in Brazil were revealed by the country’s dominant iron ore producer, Vale.
According to a report carried by the
Reuters news agency earlier today, Vale has told prosecutors in the
State of Minas Gerais that a dam holding tailings (mine residue) at its
Gongo Soco mine is at risk of rupturing.
Gongo Soco and its problem dam are
located 40 miles from a dam at the Brumadinho mine which collapsed
earlier this year, unleashing a mudslide which killed an estimated 230
people.
According to documents seen by Reuters
Vale is concerned that the dam in the city of Barao de Cocais might
collapse as soon as next week if the current rate of movement in the
embankment is maintained.
Ongoing safety concerns at Brazilian
mines and their associated dams has led to a number of forecasts that
the iron ore market could be tighter for longer, potentially prompting
Australian miners to boost production despite recent comments that they
were unlikely to take that step unless certain that Brazil would
struggle to resume full-scale production.
Heavy earth moving trucks at the Tom Price iron ore mine of Rio Tinto in Australia. Photographer: Jack Atley/Bloomberg.
BLOOMBERG NEWS
The trade-off for the Australian
miners, including BHP, Rio Tinto and Fortescue Metals, is that they’re
getting the full benefit of a higher price at a time when they have
significantly lowered costs.
If the port stocks do dry up steel
mills will be forced to buy cargoes on the spot, or short-term market
possibly pushing the price as high as $110/ton.
============================
Conclusion
With
Chinese steel production running at a record annualized rate of more
than one billion tonnes for the first time and the combination of
Brazil’s problems and surprisingly strong Chinese steel production
during a trade war with the U.S. could soon see the iron ore price move
back above $100/t, and stay there for some time. The financial outlook
2019 for LSteel is foresee to be better compare with 2018. So , the
choice is yours...
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