Shenshuo rail line transported 21.82 million tonnes of coal in April, rising 12.1% from the year-ago level, hitting a record high, said Shenshuo Railway Co., Ltd, a subsidiary of Shenhua Group.

Of this, the average haulage in the month reached 186.2 wagons.

The 266-km line, which starts from Daliuta in Shaanxi province and ends in Shuozhou in neighboring Shanxi province, mainly delivers coal from Shenfu and Dongsheng coal fields owned by Shenhua Group.

http://www.sxcoal.com/news/4555611/info/en

Diversified miner Anglo American has struck a sales agreement with unlisted Malabar Coal to divest of its 88.17% interest in the Drayton thermal coal and the much aligned Drayton South project, in New South Wales.

“The agreement to sell the Drayton thermal coal mine marks further progress as we focus our global portfolio around our largest and most competitive assets,” Anglo CEO Mark Cutifani said on Thursday.

Anglo in 2016 announced plans to divest of its coal interests in Australia, after narrowing its focus to diamonds, platinumand copper.

The Drayton transaction, details of which are confidential, will be effected through a share sale in Anglo’s subsidiary companies that hold the Drayton interest. The transaction remains subject to several conditions precedent.

Anglo American ceased mining operations at Drayton in 2016, after plans for the Drayton South coal project have been repeatedly rejected by the New South Wales Planning and Assessment Commission over fears that it will impact on nearby horse stud farms.

Anglo previously adjusted the mine plan for the Drayton South operation, including reducing the tonnage from a projected 189-million tonnes to only 75-million tonnes and cutting some A$7-billion in coal revenue. The mine plan also reduced the life of the operation from 27 to 15 years.

http://www.miningweekly.com/article/anglo-american-sells-drayton-to-unlisted-malabar-coal-2017-05-04

China iron ore imports ease in April amid cloudy outlookThe heat came out of China's iron ore imports in April, with vessel-tracking and port data suggesting a decline of several million tonnes from the near-record levels recorded in March.

A total of 83.27 million tonnes of the steel-making ingredient was discharged at Chinese ports in April, down 3.7 percent from March's 86.46 million, according to data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.

It's worth noting that the vessel-tracking and port data typically comes in below the official Chinese customs data, which reported 95.56 million tonnes of iron ore imports in March, the second-highest on record.

Nonetheless, the ship data does point to lower imports in April, most likely in the order of 3 million tonnes. Apart from a weak month in February, most likely related to the Lunar New Year holidays, the vessel-tracking figures show April to be the weakest month for iron ore imports since September last year.

It also appears that much of the decline in iron ore imports was borne by Australia, China's largest supplier, with the data showing imports of 53.9 million tonnes in April, down from 58.9 million in March.

In contrast, number two supplier Brazil saw Chinese imports of 18.48 million tonnes in April, up from March's 16.54 million. The lower imports from Australia in April are most likely the result of earlier weather-related disruptions in the main producing area of Western Australia state that affected both mines and rail networks.

This means imports from Australia are likely to recover again in May, which may be a bearish signal for prices if miners such as Rio Tinto, BHP Billiton and Fortescue Metals Group decide to chase volumes over prices.

This can already partly be seen by the 11 percent jump in iron ore shipments from Port Hedland, the terminal used by BHP and Fortescue, to 34.86 million tonnes in April from 31.5 million in March. This tallies with the Chinese import numbers from Thomson Reuters, given the sailing time of around two weeks between northwest Australia and China.

Ultimately iron ore prices are driven by steel prices and margins, and here the outlook is less certain, with the main Shanghai rebar contract trending lower in recent weeks. It hit a peak of 3,440 yuan ($499) a tonne on March 15, but slipped 9.2 percent since then to Wednesday's close of 3,123 yuan, as doubts emerged among market participants over the resilience of China's infrastructure and construction spending.

While Chinese steel output has remained robust so far this year, the market seems to be swinging toward the view that margins will be under pressure in the second half of the year as domestic demand growth slows and exports struggle.

http://www.reuters.com/article/column-russell-ironore-china-idUSL4N1I61W1

Liberty House, the industrials and commodities group that has been buying troubled steel plants, does not expect China's net steel capacity to fall, despite Beijing's capacity cut targets.

China produces about half the world's steel and pledged last year to cut 100-150 million tonnes of capacity by 2020, which along with infrastructure spending helped prices soar.

The world's second largest economy cut 60 million tonnes of capacity last year and has targeted another 50 million tonnes this year, but Liberty chairman Sanjeev Gupta said China was also adding capacity.

"I understand (the Chinese) have put a cap on (steel) capacity, which means larger plants can increase capacity and have more efficient capacity, and less efficient capacity will be taken out of the system," Gupta told Reuters on Thursday on the sidelines of the CRU World Aluminium Conference in London.

"If anything it makes it worse (for rival steelmakers) because its makes (China) more efficient, more competitive."

Gupta, who was bullish on steel even during the crisis in 2015, said there are still distressed plants that offer value, even though steel company shares globally have risen by 80 percent since early January 2015.

In the U.S., Gupta is betting anti-dumping moves under President Donald Trump will hurt the much larger manufacturing base in the long term.

The Trump administration last month invoked a seldom-used provision of law to launch a probe into whether imports of Chinese and other foreign-made steel are a U.S. national security risk.

It currently has around 150 anti-dumping and anti-subsidy duties in place on steel imports, while the European Union has 39 such measures in place on steel.

"I'm not a supporter of protectionism. I encourage the general move in the U.S. for investment in industry, but protectionism ... long term ... makes (industry) more inefficient and kills downstream (businesses)."

Gupta's 'greensteel' model is based on using renewable energy to fire furnaces that recycle locally sourced scrap and feed the finished steel to his manufacturing businesses that make high value-added goods.

The model puts Liberty's steel plants low down the cost curve, where they are less impacted by policy decisions.

Liberty's move into steelmaking, aluminium smelting and engineering, which started late in 2015, helped operating profit jump 74 percent to $99 million in 2016, while turnover soared 82 percent to $6.8 billion.

PARTIAL LISTING

Gupta, who launched Liberty House 25 years ago while studying at Cambridge University, plans to list some of its multibillion-dollar businesses, probably in 2018.

Liberty and SIMEC, which operate under the $9.4 billion Gupta Family Group (GFG) Alliance, has assets spanning steelmaking, aluminium smelting, engineering, energy, commodities trading, shipping, property and finance.

Gupta hit the headlines last year when it offered to rescue steel plants owned by Tata Steel UK (TISC.NS>. He has spent around $630 million on acquisitions in the past year.

"(Listing) will happen sooner or later for sure ... 2018 is a soft target," said Gupta.

"We want at least one if not more of the businesses to be in the public space, like energy for example, maybe steel eventually, but I'm not sure the UK is the right place for it, maybe the U.S."

Gupta previously told Reuters he was considering a partial listing in London but that a firm decision had yet to be made.

He said on Thursday that the energy business listing would probably be in London, but not steel.

http://www.reuters.com/article/steel-liberty-uk-idUSL8N1I6647

Daily crude steel output of China's key steel mills gained 0.14% from ten days ago to 1.85 million tonnes over April 11-20, according to data released by the China Iron and Steel Association (CISA).

Crude steel output in the country was estimated at 23.2 million tonnes during the same period, with daily output of 2.25 million tonnes in mid-April.

By April 20, stocks of steel products at key steel mills stood at 14.56 million tonnes, up 1.91% from ten days ago, the CISA data showed.

Rebar price dropped 6% from ten days ago to 3,412.3 yuan/t in mid-April, while wire price decreased 5.5% from ten days ago to 3,484.7 yuan/t.

http://www.sxcoal.com/news/4555595/info/en

Bazhou Xinli Iron and Steel Co., Ltd in Langfang city of Hebei province decided to withdraw from the market and had completely stopped production on April 26, Beijing Daily reported on May 5.

The move, aimed at complying with China's de-capacity policy, reduced around 3 Mtpa of steelmaking capacity.

The company has a total 3.5 Mtpa of capacity, and mainly produces strip steel and steel tube. Last year, it closed a blast furnace.

It also signaled more efforts are to be made to slash surplus steel capacity in cities of Hebei that surround capital Beijing in the future.

Langfang, Zhangjiakou and Baoding – Beijing's three neighboring cities – are expected to slash a total 22 Mtpa of steelmaking capacity in the near future.

Steel capacity of the three cities amounted to 22.5 Mtpa, accounting for some 8% of Hebei's total steel capacity. Most of the steel enterprises that are to reduce capacity in these cities are private firms.

Ferrochrome prices for the first half of 2017 are providing ongoing momentum for the ferrochrome business, which is poised to benefit from this year’s stainless steel production growth rate forecast of 3.5%.

The demand for ferrochrome is driven overwhelmingly by the production of stainless steel, which in 2018 is projected to grow by an even higher rate of 3.8%.

The latest European benchmark ferrochrome price for the three months to June 30, 2017, has been settled at $1.54/lb, well up on the average of $0.95/lb of 2016 and the $1.07/lb of 2015.

Though slightly lower than the first-quarter price of $1.65c/lb, the second-quarter price settlement continues to indicate a deficit in supply.

Pricing for the first half of this year is positive, Merafe Resources CEO Zanele Matlala commented to Mining Weekly Online during an exclusive interview.

Starting this year, Merafe’s policy is to pay a minimum dividend equal to 30% of yearly headline earnings and then also to declare special additional distributions of remaining cash not required within the business.

The idea is to return as much as possible to shareholders.

JSE-listed Merafe was formed in 2001 and had its own chrome smelter and two chrome mines, which were pooled with those of the former Xstrata in July 2004 to form the Glencore-Merafe Chrome Venture, the largest ferrochrome producer in the world, which operates eight chromite mines and 22 ferrochrome furnaces.

The way the Glencore-Merafe Chrome Venture works is that both parties retain ownership of the assets that each contributed to the venture, which uses those assets to generate the earnings before interest, taxes, depreciation and amortisation (Ebitda) that are shared in the ratio of 79.5% Glencore to 20.5% Merafe.

“Our partner, Glencore, markets our products efficiently, adds value logistically and gets good prices,” said Matlala, who heads a company that employs six people at its head office and pays 20.5% of the salaries of the venture’s 13 000-plus employees.

Eighty-seven per cent of its board members are black, 62% of its board members are women and 71% of its employees are black.

In the 12 months to December 31, 2016, Merafe’s share of the venture’s Ebitda was R1 176.2-million, 38% higher than in 2015.

Glencore has a 29% shareholding in Merafe and South Africa’s State-owned Industrial Development Corporation a 22% shareholding.

The rest of the shareholding is in free float, 41% of it in South Africa and the remaining 8% offshore.

In the past 18 months, the Merafe share has become far more liquid owing to investment management companies and institutions showing increasing interest in the share, which has been trading at prices well below the 190c a share. The analyst consensus on the share is currently between 179c to 300c a share.

STRONG INVESTMENT CASE

Merafe has a strong investment case that centres on factors such as its strong cash-flow generation, its secure long-term supply of ore reserves, its partnership with the global leader of chrome-ore and ferrochrome marketing, and its energyefficient technology that makes Merafe the lowest-cost producer in South Africa and the second-lowest cost producer in the world.

Cost containment and cost reduction are the major pursuits of both the Glencore-Merafe Chrome Venture and the Merafe head office, where corporate costs fell to R30.2-million in 2016 compared with R34-million in 2015.

Chrome ore, electricity and reductants are the main cost contributors. The cost of chrome ore is driven mainly by labour, with wages being negotiated by labour unions.

The cost of electricity, which has been a major factor in the past, is no longer as big a concern, exemplified by the National Energy Regulator granting electricity utility Eskoma tariff increase from April 1, of 2.2%, the lowest for some time.

Because of the use of Premus technology at the Lion II smelter, a key competitive advantage is that the venture’s power costs are lower than those of its competitors.

Had the Lion operation not installed the Premus technology, it would have needed an additional 1 776 MWh to produce the same volume of ferrochrome.

Reductant costs have also been declining. The Lion smelteralso uses considerably less coke and more locally produced, lower-cost anthracite and char than conventional smelters.

Efficiency is increased through pelletising to cope with increasing volumes of fine chrome ore, with the pelletised material put through prereduction kilns that radically reduce furnace time and, thus, electricity consumption.

The exchange rate of the rand against the dollar is a significant factor because most of the Merafe product is sold in dollars, making the conversion to rand important.

The exchange rate prevailing at the time of going to press was similar to the 2016 average exchange rate of R14.70 to the dollar.

DEBT REDUCTION
Ranking after cost management on the priority list is debt reduction. In early 2017, Merafe debt was reduced to R226-million, the planned elimination of which in the next two years will position Merafe to take advantage of opportunities that may arise and augment dividend payouts.

When the company was investing heavily in large new cost-reducing projects in past years, there were more moderate dividend prospects for share investors than is the case now that the company is harvesting the fruits of all those investments and has fewer demands on its cash.

Throughout the lengthy period of capital project funding, Merafe at no stage resorted to the raising of equity capital and in the main funded most the capital programme from cash flow.

The large Lion II smelter project was funded largely from cash flow and some debt, which has been substantially repaid, as have is capital contributions to the Bokamoso and Tswelopele pelletising and sintering plants, the upper group two plants and the Wonderkop acquisition.

Last year’s ferrochrome revenue and chrome ore revenue were the highest ever.

Merafe reported a 61% year-on-year increase in chrome ore revenue on 38% higher chrome ore sales volumes to 372 000 t and 7% higher chrome ore prices.

The record production of 393 000 t in 2016 was only at about 82% of installed capacity and the company’s latest guidance to the market is that production at a level of 85% of installed capacity of 2.339-million tonnes is achievable in 2017, taking into account the maintenance carried out during the winter months when power is more expensive.

The record level of sales of 437 000 t in 2016, which included selling from stock, will not be repeated in 2017.

The company recorded its highest profit in 2008, when ferrochrome prices soared to $2/lb. With excess electricity
supply now available, incentivised rates may well be negotiated for the winter months for additional use of electricity.

Merafe’s attributable ferrochrome production from the Glencore-Merafe Chrome Venture for the first quarter of 2017 increased by 10% to 113 000 t compared to the comparative period. This increase was primarily attributable to improved performances and efficiencies across Venture’s furnaces, coupled with the restarting of Rustenburg furnace 5 in the second half of 2016. Merafe will hold its next annual general meeting on May 4 and present its interim results for the first six months of 2017 on August

http://www.miningweekly.com/article/positive-prices-buoying-ferrochrome-business-merafe-2017-05-03