Iron ore shipments through Port Hedland to China fell in August to their second-lowest monthly total this year; the lowest if the Lunar New Year-impacted February data is eliminated as being unrepresentative.
August’s shipments to China totalled 35.912 million tonnes last month, the lowest this year since the 30.73 million tonnes shipped in February when exports were reduced by China shutting down for a week for the Lunar New Year break.
In fact, the fall in exports through Port Hedland to China from August 2020 was more than 10%, one of the largest year-on-year falls (outside of Lunar New Year months of January and February).
Compared to July’s 38.61 million tonnes, shipments to China fell a smaller 7% last month.
There’s considerable speculation the Chinese government is cracking down on steel industry emissions because the industry has done little since the campaign started in 2015 and 2016, as well as to show falling emissions ahead of the Glasgow conference on global warming in November and then the 2022 Winter Olympics near Beijing next February.
For that reason, analysts have written off the December half of 2021 and then the first quarter of 2022 so far as future growth in demand for iron ore from Chinese steel mills.
Analysts suggest demand, if it returns, will not be noticed until the closing months of the June quarter next year at the earliest.
The release of the August iron ore exports figures for Port Hedland, the world’s biggest port by volume, came the same day as global prices for the key steelmaking material fell to new year lows on Friday with the price of 62% Fe fines delivered to northern China from the Pilbara at $US129.71 a tonne.
Overall exports through Port Hedland in August totalled 43.9 million tonnes, down 4.7% compared with 46.1 million tonnes a year earlier.
China is limiting crude steel output in the current December has so that full year output is no higher than its 2020 production of 1.065 billion tonnes.
The cuts are aimed at to curbing industrial pollution and reducing the cost of the key input for the steel sector and price pressures across the economy generally.
That has so far failed with produce price inflation rising at an annual rate of 9.5% in August, the highest annual rate since 2008 and the third highest since records started in 1996.
In Jiangsu, China’s second-largest steel-producing province, a campaign to monitor energy consumption among industrial enterprises including steelmakers raised fears of further disruption in blast furnace operations, the Mysteel consultancy reported on Friday.
Steel producers in Tangshan remain under order to curb output and reduce pollution around Beijing, 180 Kms to the northwest.
But the outlook for steel pricing in 2022 remains up in the air and perhaps isn’t as gloomy as thought amid confusion caused by the current price falls.
After lifting iron ore exports more than 11% to nearly 34.8 million tonnes in August from a year earlier (when they totalled 31.2 million tonnes), there was a shock last Thursday when Brazilian iron ore giant, Vale lopped 30 million tonnes from its forecast for 2022 output.
The company says it is now targeting production capacity of 370 of million tonnes next year, compared with a previous target of 400 million tonnes.
This news adds to the belief that the iron ore sector will not see any real improvement (that is sustainable) for 9 months to a year.
The reduction was blamed on issues in its prized high-grade (64% to 67% Fe ore) operations in northern Brazil — namely, delays in securing government approvals and permits for a project at the Serra Norte complex and additional waste-processing facilities.
Those obstacles mean Vale is now projecting annual capacity in the north to reach 215 million tons in the “medium term.” It’s now targeting a run rate of 205 million tons next year, down from a previous estimate of 230 million tons.
About 80% of the company’s planned investments in iron ore capacity through 2024 is forecast to come from company’s the northern operations.
Vale also cut its 2021 capital expenditure budget to $US5.4 billion from $US5.8 billion. No reason was given buy analysts blamed it on the project delays and a weaker local currency may be countering growing inflationary pressures in Brazil.
Vale shares peaked in May (when global prices peaked as well) but since then the price has slumped by more than 22%, including a 5.5% slide last week.
Fortescue metals shares have lost more – down 31% from their high and Rio shares are down more than 22%.
BHP shares are down 24% since their all time high but on top of the iron ore slump (which is partly offset by the surge in coal export prices, especially for hard coking coal and still high copper prices) the price has been impacted by the decision to spin off the oil and gas business to Woodside, and the proposed ending of the dual listing in London and relocating the company in Australia.
