The world’s three biggest iron ore miners are expected to confirm the industry’s strongest ever quarterly export figures this week, helping to explain recent weakness in prices for the bulk commodity.
Big miners have exercised restraint in both supply and rhetoric in recent years in a bid to calm fears the iron ore market could be flooded with supply, but port statistics suggest the miners’ inexorable export growth reached new heights in the three months to June 30.
Brazilian miner Vale is expected to announce record quarterly production of 96.3 million tonnes when it kicks off reporting season early on Tuesday morning Australian time, and Rio Tinto is expected to report strong numbers of its own several hours later.
UBS believes Rio Tinto shipped 88.9 million tonnes from Western Australia in the quarter; a performance that would be its second best quarter ever and would put it on track to test the top end of its iron ore export guidance range for the 2018 calendar year.
The world’s third biggest producer, BHP, will publish its production and export data on Wednesday, amid expectations it shipped record volumes of about 71.7 million tonnes during the quarter, including tonnes owned by joint venture partners such as Itochu.
“This quarter represents a record annualised rate of 288 million tonnes per year, noting that one day BHP hopes to ship at 290 million tonnes per year out of Port Hedland,” said UBS analysts in a note.
Collectively growing output
UBS believes BHP shipped about 274 million tonnes from the port in fiscal 2018, which would see it fall just short of its original vow to ship between 275 million and 280 million tonnes in the year.
BHP shares Port Hedland with rival iron ore producers Fortescue Metals Group, Atlas Iron, Mineral Resources and Gina Rinehart’s Roy Hill.
Collectively those five miners grew output by 3 per cent in the year to June 30, with 508.9 million tonnes of iron ore shipped through the port.
That tally appears to have been bolstered by a late rush from Fortescue, which was estimated to have shipped a record 46.3 million tonnes during the June quarter.
If that estimate proves correct, it will mean Fortescue was shipping at an annualised rate of almost 186 million tonnes per year; far above the 170 million tonnes it expects to ship most years, and even further above the 155 million tonnes per year that was expected to be its full potential when it launched a $US10 billion expansion plan in 2011.
While the strong finish to fiscal 2018 will provide encouragement for Fortescue’s future, the late rush will only repair Fortescue’s weak performance between October and March, which is expected to ensure it still falls marginally short of its 170 million tonne export target for the year.
Iron ore prices traded as high as $76.88 per tonne in February 2018 when the world’s five biggest producers were suffering disruptions, but the strong output in recent months appears to have weighed on prices, with the benchmark price for ore with 62 per cent iron content fetching $US59.17 per tonne on Friday.
The price has averaged $US67.48 per tonne over the past year and $US66.38 per tonne since January 1.
‘We would not be surprised to see guidance further lowered’
The Department of Industry, Innovation and Science has suggested that iron ore will lose its mantle as the country’s biggest export by value in 2018-19 for the first time in a decade due to its falling price, and a stronger price for coal. Exports of coal will hit $58.1 billion in 2018-19, surpassing iron ore with $57.7 billion.
If analyst forecasts for BHP, Fortescue and Mineral Resources’ exports are correct, it will mean Roy Hill has exported slightly less than 50 million tonnes in fiscal 2018.
After unplanned disruptions in January and February, Roy Hill has displayed better performance in recent months, raising hopes that fiscal 2019 could be the first year it achieves its goal of shipping 55 million tonnes in a single year.
While iron ore continues to dominate Rio’s revenues, its mineral sands division has been plagued by disruptions of late, with violent protests bringing its Richards Bay operation in South Africa to a fresh halt on Wednesday.
UBS said the latest disruptions could force Rio into a another downgrade of its mineral sands production guidance.
“We would not be surprised to see guidance further lowered given the challenging situation at Richards Bay,” said the bank in a note.
Rio and BHP are expected to have a better story to tell in copper, thanks to surging output at the Escondida mine they jointly own in Chile.
Source: Australian Financial ReviewPrevious Next