So where are all the ‘experts’ on iron prices today in the wake of the way global prices recovered from last week’s mini-tremble.
There they were – investment banks especially Liberium in London, other analysts, journalists and anyone else telling us that iron ore prices are heading south because Vale will be brining another 7 million tonnes of iron ore fines back on stream in Brazil shortly.
So down went prices – the Metal Bulletin index price hitting a low of $US114.97 a tonne on Wednesday for the standard 62% Fe iron ore shipped to Northern China.
That was down 8.6% from the peak of $US125.77 hit on July 2 and more falls were to come, according to our clutch of ‘experts’.
But it didn’t as the Metal Bulletin index price recovered to close the week at $US118.31 on Friday. That was a rise of around 3% in two days.
While it was down from the previous Friday’s close of $121.79, it was less than $US1 a tonne under the close two Friday’s before of $US119.29 a tonne.
What the ‘experts’ all ignored was commentary in Vale’s June quarter report that pointed out while the giant was bring more tonnage back online, it could be two to three years before the company’s production and sales were back to 2018 levels of around 386 million tonnes of exports.
The January 25 tailing dams disaster has hit Vale hard and the company makes no secret of the fact.
In its production report Vale released last week, Vale said it had “made substantial progress concerning the 93 million tonnes per year (mtpy) of Iron Ore production capacity stopped in 1Q19, with the resumption of Brucutu operations on June 22nd, recovering 30 Mtpy of production capacity.
“Regarding the 60 Mtpy currently curbed, Vale expects that the 30 Mtpy of dry processing production will be gradually resumed starting by the end of this year and the remaining 30 Mtpy, which includes wet processing, is estimated to return in about two to three years,” the company said. That forecast has been ignored in Australia and globally.
Vale reaffirmed its previous full-year iron ore and pellets sales outlook forecast at between 307 million to 332 million tonnes with the likely outcome towards the midpoint of the range.
Vale’s June quarter financial results will be issued this week and the full impact of the shortfall won’t be there for all to see because the near 40% jump in prices will allow the company to avoid the full financial pain of the January 25 disaster on its day to day operations.
The company though looks like paying out billions of dollars in compensation and aid to victims and the clean up of the damage caused.
The faux gloom about the immediate outlook for iron ore undermined the prices of major producers, especially Fortescue Metals which released its 4th quarter and 2018-19 production, sales and pricing data and is looking a huge full-year profit.
BHP Group shares dropped 0.5% to $40.85 this week while Rio Tinto shares lost 4% to $98.26. Fortescue shares shed 4.7% to end at $8.29.
