22-04-2016

Iron ore prices surge while miners’ data falls short on expected supply

iron

Iron ore prices Thursday surged to a 15-month high, led up by global steel price increases and healthy Chinese buying, while being supported by growing data from miners this week suggesting the supply bonanza the market had been expecting may fall short.

Anglo American Thursday said output of pellet feed in Brazil from Minas-Rio, which is still ramping up, increased by only 3% in Q1 2016, from the prior quarter, to 3.3 million mt, or at a 13.2 million mt rate annualized.

Production guidance for the operation in 2016 remaining at 15-18 million mt implies the need for further increases in production rates, even to reach the low end of the range.

The company blamed barriers to its Minas Gerais-based mining area, with operations suffering confinement arising from current licensing delays that had worsened following Samarco’s mining accident nearby, in November 2015.

As Anglo transitions Kumba in South Africa to improve efficiencies at the iron ore lump and fines operations, Q1 output plunged. Anglo plans to sell its iron ore assets eventually.

BHP Billiton’s quarterly iron ore production declined, leading it to downgrade output guidance for its financial year to end-June, 2016 by around 10 million mt.

As the second-biggest iron ore miner in Australia and a major supplier to China, this may be tightening supply-side dynamics in the near term.

Rio Tinto cut iron ore production outlook in Western Australia for 2017 by up to 20 million mt, blaming delays in rolling out an automated train system.

The miner’s 330 million-340 million mt target for the Pilbara in 2017, compares with earlier announcements it had implemented over 2015 the infrastructure to reach 360 million mt/year capacity through the chain.

Brazil’s Vale overnight mentioned degrading southern iron ore grades and volumes were compensated by growth through its new pits in the Carajas system, putting major expansion in overall output on hold as Q1 volumes were steady on the year earlier.

BHP and Vale lost pellet output from their jointly held Samarco venture, with Vale idling the Fabrica pellet plant blaming lack of feedstock following the accident.

Source: Platts

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