It’s no wonder world iron ore prices were rising before the Russian invasion of Ukraine cut off supplies of iron ore and pellets to the world late last month. For the past three months, Brazilian exports of high-grade ore have fallen short of 2021’s high levels by around 10 -11 million tonnes because of heavy rain which has interrupted production and exports.
At the same time Australian exporters through Port Hedland to China in February fell from January’s near 12-month high because of the timing of the Lunar New Year but were still up on a year earlier.
Exports through Port Hedland to China in January and February totalled 73.82 million tonnes, up 11% from 66.28 million shipped in the first two months of 2021.
February’s shipments to China at 33.67 million tonnes were down from January’s near year high of 40.45 million tonnes but were still nearly 10% above the 30.73 million tonnes exported in January, 2021.
The Brazilian shortfall helps explain why Chinese iron ore imports were steady in January-February at just over 181 million tonnes.
Brazilian exports of iron ore were down by 19.79% year on year in February, thanks to the lingering effects of heavy rainfall in one of the country’s main producing states.
Brazil’s ministry of economy says iron ore exports from Brazil totalled 19.25 million tonnes in February, down from 24 million tonnes a year earlier.
That was after iron ore exports in January fell nearly 13% to 25.21 million tonnes, compared with 28.93 million tonnes in January 2021.
In December, 2021 ended with Brazil’s iron ore exports falling 5% to 31.4 million tonnes from 33.1 million in December, 2020 as wet weather hit southern mines owned by Vale.
November exports totalled 29 million tonnes, down slightly from 2020’s 29,14 million.
62% Fe fines iron ore futures (delivered to northern China on a cfr basis) on the Singapore Exchange (SGX) on Thursday at just over $US162 a tonne after touching $US165 a tonne in trading.
That’s up almost 25% from just over $US133 a tonne on February 18 when the Russian pressure on Ukraine was moving towards the invasion six days later.
The Brazilian shortfall tells us that the price rise is not solely a reaction to the Russian invasion of Ukraine (which is a small exporter of iron ore, pellets and steel products.
While Australian exports are reported to have been solid through February for a second month in a row, La Nina rains has hit iron ore mines in the north and south of the country, especially those run by Vale, the world’s second biggest exporter.
On top of the impact of the Brazilian short fall, the higher-than-expected iron ore prices means China is paying a price for its tacit support of Russia’s Ukraine invasion.
Both Russia and Ukraine are significant exporters of iron ore and steel products, a trade that is already fading.
Ukraine will be unable to export because of the war, and Russia’s shipments will likely face difficulties as buyers self-sanction trade with Russia – not only because of the outrage at Russian violence in Ukraine, but because of the growing exclusion of Russian trade by banks, trade financiers and insurers, shipping companies and their insurers and others in the commodity trading chain.
Ukraine exported 2.92 million tonnes of iron ore in January and 3.27 million in December. Monthly shipments range from around 1.8 million tonnes to about 3.7 million in the past two years.
Russia’s exports are smaller, typically no more than 500,000 tonnes a month, however, its shipments of steel tend to average slightly more than 1 million tonnes per month.
The loss of Ukrainian iron ore exports is relatively small, but will force buyers to look elsewhere, with European steel mills likely turning to Atlantic basin shippers such as Brazil, and South Africa, while Asian importers will try to source more from Australia, and perhaps second-tier producers such as Iran and India.
Ukraine’s exports to China were 1.3 million tonnes in January and 1.96 million in December, according commodity company data
Losing that supply will tighten the market somewhat in China, which buys about 70% of global seaborne iron ore. China will find it tough to replace this ore because local producers are not flexible enough
Because of its position, the quality of its ore and the ease of shipment, Australian product is now a ‘swing’ supply source when shortfalls happen in Brazil and now in Russia and Ukraine. If only the insular, politically-driven Chinese would understand that it would save then time and money.
