Spot iron ore prices rose from $75 per tonne to
$95 per tonne in the weeks following the Brumadinho dam disaster at Vale’s
(NYSE: VALE) Feijao iron ore mine in Brazil, before settling in at about $85
per tonne, according to the latest research on the global iron ore market by
the Macquarie Group.
Spot prices are now back up at the $95 per
tonne level as lower shipment volumes out of Australia mainly due to Cyclone
Veronica have contributed to supply disruptions from Brazil, analysts at the
Australian investment bank and financial services company report.Spot prices
are now back up at the $95 per tonne level as lower shipment volumes out of
Australia mainly due to Cyclone Veronica have contributed to supply disruptions
from Brazil
In addition, premiums for high grade ore and
discounts for lower grade ore have shrunk since the Brumadinho tragedy,
Macquarie points out. Prices have risen by about 35% year-to-date for lower
grade ore, while the premium for high grade ore has increased by 23% year to
date.
Vale’s share of total shipments from Brazil has
dropped to about 50% from a peak of about 90%, the report states. “While
initially the quantum of decline was managed by the selling of stockpiles,
recent sharp declines shows the extent of the supply disruption.”
The supply/demand dynamics benefit Australia’s
iron ore miners.
“At spot prices all covered Australian iron ore
miners see a substantial increase in forecast calendar year earnings per
share,” the report stated. “BHP, Rio Tinto, and Mineral Resources Inc. see CY19
EPS increase by about 30% each, while the pure-play exposure is highlighted in
Fortescue Metals Group and Mt. Gibson Iron as CY19 increases by 60% and 120%
respectively in a spot scenario.”
Source: Mining.com