It will pay to watch the ASX share prices today of iron ore exporters, Rio Tinto, BHP, Fortescue and the clutch of wannabees left in the sector after a big dam collapse at a Vale mine in Brazil last Friday.
Iron ore prices in China rose strongly yesterday on the news.
The Metal Bulletin index price for 62% iron ore delivered to northern China rose 4.7% to $US78.18 a tonne.
Other ore types rose by similar amounts with the key Brazilian type – 65% low aluminum ore rising to more than $US91 a tonne.
The shares of Australian producers are likely to kick higher as it becomes clear that supplies from major supplier, Vale of Brazil will be impacted by the second dam collapse in three and a bit years.
BHP shares closed at $A33.05 on Friday, Rio at $80.47 and Fortescue shares ended at $4.80.
Vale shares fell 8% in New York on Friday and were down more than 23% in Brazil on Monday, wiping more than $US18 billion from the mining giant’s market value.
Vale’s Corrego mine – where the latest dam collapse occurred – accounts for 1.5% of output for Vale, the world’s largest iron ore miner.
While not significant there is growing concerns that the Brazilian government will order the company to shut its other iron ore mines in Brazil to carry out detailed safety checks.
That could see supplies of high-grade ore (65% and low aluminum) cut back sharply to global markets, especially to China. If that was to happen iron ore prices would soar – possibly past $US100 a tonne.
Traders, worried about cuts to Brazilian iron ore exports (Vale is the biggest shipper in the world, followed by Rio Tinto, BHP and Fortescue of Australia, bid futures prices to well over $US84 a tonne on Monday, before they settled back to trade at just over $US82 a tonne).
Vale and its partner, BHP had been preparing to resume operations at Samarco, another iron mine in Brazil (which produces pellets, not ore), which saw Brazil’s biggest environmental disaster in 2015 when dams holding waste material collapsed.
