Standby for another round of selling in the big three iron ore companies today in the wake of a slump in global prices on Friday after Donald Trump’s move to step up his trade war with China.
Rather than the prospect of more Brazilian iron ore coming onto the market pushing prices lower, it was Trump’s inflammatory tweets warning of another 10% tariff on $US300 billion of imports from China from September 1 that triggered Friday’s price plunge.
According to Metal Bulletin figures for 62% iron ore, the index price fell 6.9% to $US107.73 a tonne from $US115.68 on Thursday. That took the week’s losses to 9% from the previous week’s close of $US118.31 a tonne
Friday saw a big sell down in the price of BHP, Rio, and Fortescue shares on news that Vale (the big Brazilian miner) is now producing more iron ore.
That saw Rio shares lose 3.1% on Friday (and 3.5%) for the week, and3.3% in London on Friday night. BHP shares fell 3.7% on Friday and more than 5% for the week. BHP shares fell 4.7% in London on Friday.
Fortescue was the big loser – its shares slid 6.1% on Friday to be down 7.8% for the week.
Vale is producing iron ore at an annual rate of around 340 to 345 million tonnes a year, according to a company briefing last week. That compares to the estimated guidance for 2019 of 307 million to 332 million tonnes of iron ore and pellets.
That compares to around 400 million tonnes of iron ore and pellets (384.6 million tonnes of iron ore fines) in 2018.
Investors again failed to heed comments from Vale management that the higher production rate would need to replace 6 million tonnes of iron ore of offshore inventory that was drawn down in the first and second quarters to help maintain suppliers to customers.
Despite the higher rate, Vale again said last week it will take two more years, perhaps three for production and sales return to 2018 levels,
Most of that was from the company’s big Malaysian facility. That’s just over a week’s production from the company’s northern mining complex and means the ore will not be sold into the global market but used to replenish stockpiles.
