Yet another near six-year-old record for global iron ore prices on Tuesday with the price jumping to $US125.77 a tonne for the standard 62% Fe product delivered to northern China.
The $US2.12 a tonne or 2% rise means the price for the 62% grade ore has risen more than 6.7% in the first two days of July and is up 74% so far in 2019.
The Metal Bulletin commented that prices rose Tuesday due to “persistently tight supply and news about an easing of the restrictions on steel production in China.”
The narrowing of spreads between different grades continues especially between the 65% Fe grade (US133.10 on Tuesday and the 62% product. That is now down to around $US8 a tonne – several months ago it was $US12% to 15 a tonne.
The supply constraints were underlined Tuesday with the June shipment data from the Brazilian government.
That showed exports of 29.4 million tonnes of iron ore in June, down by 16.7% from 35.3 million tonnes in June 2018 and 1.40% lower than 29.8 million tonnes in May 2019.
There was one less working day in the month, on an annual comparison, which influenced the size of the decline.
Lower shipments from Australia are continuing to add to the upward pressure on iron ore prices.
Rio Tinto has cut its guidance on volumes of iron ore it expects to ship from the key Pilbara producing region in Australia for the third time since April, citing operational problems at its Brockman Hub and Westpac analysts quoted by Reuters yesterday say Australia’s iron ore exports data for June “so far is less impressive.”
While Vale has brought its Brucutu mine (in its southern mining system), back to full capacity late last month (30 million tonnes a year in total), Westpac analysts said the supply outlook for the year had not improved significantly.
“Our models point to combined exports from Brazil and Australia down 36mt (million tonnes) for the year to date versus last year,” they said, Reuters reported.
“Given Rio’s guidance and the lags in Brazil, it will be some time indeed before increased global supply offset the current structural deficit in this market,” the analysts said.
