Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>The <strong>Singapore gasoil 10 ppm benchmark</strong>, which is commonly used to calculate diesel costs for iron ore players like <a target="_blank" rel="noopener">Fortescue Metals (FMG AU)</a>, has declined 45% from its April peak.</li>
<li>The <strong>BDIY has also corrected from its peak levels of 3000 to the low 2000's</strong>. While some cost pressures have eased, iron ore prices have also pulled back.</li>
<li>From a margin perspective, on the higher end of the cost curve, like <a target="_blank" rel="noopener">Fenix Resources (FEX AU)</a>, will experience a bit of margin pressure, although long-term, we like the name.</li>
</ul>


The Singapore gasoil 10 ppm benchmark, which is commonly used to calculate diesel costs for iron ore players like Fortescue Metals (FMG AU), has declined 45% from its April peak.
The BDIY has also corrected from its peak levels of 3000 to the low 2000's. While some cost pressures have eased, iron ore prices have also pulled back.
From a margin perspective, on the higher end of the cost curve, like Fenix Resources (FEX AU), will experience a bit of margin pressure, although long-term, we like the name.


Iron Ore: Temporary Relief With The Correction in Diesel And Shipping Costs

<ul>
<li>Iron ore producers are being squeezed by high freight costs (BDIY has increased by 50% since the war) and diesel costs, increasing production costs by 5-10 USD/ton.</li>
<li>Support on the cost curve keeps iron ore prices range-bound between 100 and 110 USD/ton. Elevated inventories at Chinese ports are an overhang, as monthly imports have normalized.</li>
<li>All eyes will be on freight/diesel costs coming down in H2 as tensions around the Straits of Hormuz ease, providing a buffer to the iron ore producers. </li>
</ul>


Iron ore producers are being squeezed by high freight costs (BDIY has increased by 50% since the war) and diesel costs, increasing production costs by 5-10 USD/ton.
Support on the cost curve keeps iron ore prices range-bound between 100 and 110 USD/ton. Elevated inventories at Chinese ports are an overhang, as monthly imports have normalized.
All eyes will be on freight/diesel costs coming down in H2 as tensions around the Straits of Hormuz ease, providing a buffer to the iron ore producers. 


Iron Ore: Margin Squeeze For Players On Freight And Diesel Costs

<ul>
<li>The iron ore cost curve has risen by 5-10 USD/ton since the blockage of the Straits of Hormuz, which has put upward pressure on diesel prices (15%-20% of mining costs).</li>
<li>Chinese blast furnace capacity utilization is now trending towards 90%, leading to mill margins inflecting into positive territory, based on commentary provided by <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> in its Q1 results.</li>
<li>Iran's steel/iron ore production (30/~45 million tons respectively) has stalled, and Simandou's ramp-up guidance (10-15 million tons for FY26) is slower than initially anticipated by the market. </li>
</ul>


The iron ore cost curve has risen by 5-10 USD/ton since the blockage of the Straits of Hormuz, which has put upward pressure on diesel prices (15%-20% of mining costs).
Chinese blast furnace capacity utilization is now trending towards 90%, leading to mill margins inflecting into positive territory, based on commentary provided by Vale (VALE US) in its Q1 results.
Iran's steel/iron ore production (30/~45 million tons respectively) has stalled, and Simandou's ramp-up guidance (10-15 million tons for FY26) is slower than initially anticipated by the market. 


Iron Ore: Simandou Supply Disappoints/ What's Happening To The Cost Curve/ Chinese Mills Profitable?

Iron Ore, Copper, Equities, Mint Finance

Umang Agrawal

Iron Ore, Copper, Equities

Deep Fundamental Analysis

Mint Finance

Mint Finance's investment research blends deep fundamental analysis with technical & quant insights. Investment strategies straddle across multiple asset classes with risk management embedded into every trade to deliver an outsized reward-to-risk ratio.

Mint Finance's research is centered around three key themes. First, energy transition and climate change. Second, artificial intelligence. Third, shifting world order with its impact across politics and monetary economics.

<ul>
<li>BHP’s weather-related volume softness is partly offset by improved visibility on China flows, though weaker copper output raises execution risks at a time of higher market sensitivity.</li>
<li>Rio Tinto’s solid production is overshadowed by softer sales, with Simandou’s high-grade upside contingent on Chinese mill economics and a still selective demand environment.</li>
<li>Both companies appear to understate diesel-driven cost pressures, with rising fuel intensity likely to steepen the cost curve and compress margins more than currently guided. </li>
</ul>


BHP’s weather-related volume softness is partly offset by improved visibility on China flows, though weaker copper output raises execution risks at a time of higher market sensitivity.
Rio Tinto’s solid production is overshadowed by softer sales, with Simandou’s high-grade upside contingent on Chinese mill economics and a still selective demand environment.
Both companies appear to understate diesel-driven cost pressures, with rising fuel intensity likely to steepen the cost curve and compress margins more than currently guided. 


BHP Blinks First on China Index, Now Pressure Builds on Rio Tinto

<ul>
<li>With ongoing <a href="https://www.afr.com/world/asia/no-credible-exit-china-takes-on-bhp-to-reorder-a-276b-market-20260402-p5zl0f" target="_blank" rel="noopener">restrictions on BHP products by the CMRG,</a> China continues to stockpile iron ore, with port inventories exceeding 47 days (~165 million tons). </li>
<li>As a result, imports from China are up 10% YoY to 210 million tons for Jan-Feb, and are likely to remain strong with ramp-ups by <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">(RIO AU)</a> and <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">(VALE US)</a>. </li>
<li>With steel production stabilizing and apparent demand at -5.6% YoY (coupled with restocking), it is likely that iron ore prices will hold up in the 100-110 USD/ton range till Q3.</li>
</ul>


With ongoing restrictions on BHP products by the CMRG, China continues to stockpile iron ore, with port inventories exceeding 47 days (~165 million tons). 
As a result, imports from China are up 10% YoY to 210 million tons for Jan-Feb, and are likely to remain strong with ramp-ups by (RIO AU) and (VALE US). 
With steel production stabilizing and apparent demand at -5.6% YoY (coupled with restocking), it is likely that iron ore prices will hold up in the 100-110 USD/ton range till Q3.


Iron Ore: China Steel Demand Stabilizes, Port Stocking Continues Unabated

Australia

Fenix Resources Ltd operates as a resource exploration company. The Company explores for iron ore, vanadium, and manganese. Fenix Resources develops its projects in Australia.

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Fenix Resources (FEX AU)

Iron Ore: Temporary Relief With The Correction in Diesel And Shipping Costs

The massive decline in diesel prices (Singapore gasoil) of 45% from the peak and the retreat in BDIY are helping spreads for iron ore producers. We...

Sameer Taneja

Iron Ore: Margin Squeeze For Players On Freight And Diesel Costs

Iron ore producers could see a squeeze on margins if freight rates remain elevated over the course of H2 as China exits its peak construction...

Sameer Taneja

Iron Ore: Simandou Supply Disappoints/ What's Happening To The Cost Curve/ Chinese Mills Profitable?

China's mill margins are turning positive, but watch the risks: diesel shortages are squeezing the cost curve, and Simandou supply is...

Sameer Taneja

BHP Blinks First on China Index, Now Pressure Builds on Rio Tinto

Cyclone-hit shipments, patchy copper output, and cautious buying reveal a gap between production strength and real demand across BHP and Rio.

Mint Finance

Iron Ore: China Steel Demand Stabilizes, Port Stocking Continues Unabated

China is stockpiling iron ore amid the BHP/CMRG standoff and negotiations, supporting prices near $100–$110/ton. We assess the medium-term iron‑ore...

Sameer Taneja

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