It will pay to keep an eye on the Port Hedland iron ore export figures for March and then April when they are released over the next couple of months after February saw another dip in shipments to China to a very low 30.73 million tonnes.
That’s the lowest monthly total in almost two years (since March 2019).
This figure was down 13.5% from the 35.5 million tonnes shipped to China in January and 25% lower than the 40 million tonnes shipped in December when total exports through Port Hedland hit a near record 46.5 million tonnes (the all-time high was 48.4 million tonnes last June with over 42 million tonnes shipped to China).
Exports in November were a low 34.4 million tonnes thanks to maintenance work at the Roy Hill mine and port facilities.
Overall Port Hedland shipped 37.5 million tonnes of iron ore in February, compared with 38.8 million tonnes a year earlier. The port was closed for just over half a day in February due to a tropical low.
February’s exports are also 11.2% lower than 42.2 million tonnes shipped in January and a massive 9 million tonnes or 19% under December’s level.
In January and February, a total of 66.2 million tonnes was shipped to China, down slightly from the 67.3 million tonnes in the same period of 2020. But it was also down on the 68.5 million tonnes shipped in the first two months of 2019.
On previous form, that’s a normal start to the year (explained below) but with Australia – China trade tensions still high, some careful analysts will be watching the March and April figures closely to see if there is any sign of a clamp on purchases of Australian ore by Chinese steel mills.
The amount of ore shipped in both months is influenced by both the timing of the Lunar New Year (this year it started on February 11 with New Year’s Eve). When it is in late January or early February exports in December rise, as they did in 2020 with the record 46.5 million tonnes.
Weather – cyclones, in particular – also influences export volumes but so far in the current cyclone season there have only been a series of tropical lows that interrupted port operations briefly in December, January and February.
A further factor of growing importance has been pollution control measures especially in northern Chinese steel making hubs where controls on emissions have seen operations cut by 50% at times with sintering and coke-making operations curtailed.
This has seen a drop in daily steel production and iron ore consumption, with a knock-on effect to demand at Port Hedland (the closest iron ore port to China for mostly 62% Fe fines).
That has happened several times in the past month, most notably earlier this week which saw prices fall more than 5% for 62 Fe fines. The winter heating season in China ends on March 15 which usually sees the start of an easing in restriction as daily temperatures start rising into spring.
But the curbs can continue as winter lingers. This winter season has been especially cold with near record demand for home heating seeing a surge in electricity and gas production and imports, (but not coal).
On top of this there’s 2021 is the start of a new five-year plan for Chinese industry – in steel the government wants to see a reduction in steelmaking capacity and more and more of the existing facilities made greener with lower carbon emissions.
All this has seen iron ore prices remain in a range of $US164 to $US178 a tonne for 62% fines (the main product exported and consumed).
This week saw a big fall back to the $US164-$US165 a tonne level. It might have been a one-off fall, but it is worth keeping an eye on.
62% Fe index prices are now just over $US10 a tonne above the $US164.47 price reported by the Metal Bulletin at the end of 2020, so another big lurch lower will push iron ore prices into negative territory for the year.
The NAB predicted this week in its resources outlook that the 62% Fe price will peak around $US170 a tonne in April then ease over the rest of 2021. It may have already done that (though a supply problem in the Pilbara or in brazil could quite easily change that).
Many Chinese steel making companies are doing by way of replacing older facilities with either new blast furnaces, greener steel making and rolling facilities and/or takeovers or mergers, once government approvals are given.
If past years are any guide, iron ore exports to China will rise in March and peak in June. That’s why investors with stakes in companies like BHP, Rio, Fortescue, Mineral Resources and Grange Resources should monitor the monthly iron ore import data from China and the export data from the Pilbara Ports Authority.
