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“We are currently evaluating the impact of the Covid-19 [disease], which could create significant uncertainty for our business in the near term,” the miner said during its financial results announcement on Wednesday February 26.
The miner revised its iron ore guidance for 2020 shipments to 324-334 million tonnes, down from a previous guidance of 330-343 million tonnes due to the impact of cyclone Damien on its Pilbara operations in Australia last month.
Rio Tinto’s iron ore shipments stood at 327.4 million tonnes last year.
“The spread of the virus has affected sentiment. Services, construction and manufacturing in China have already been affected and supply chain disruptions are a real possibility,” Jean Sebastian Jacques, chief executive officer of Rio Tinto, said last week.
But the miner expects the Chinese government’s stimulus measures to have a positive impact in containing the virus and improving economic sentiment.
“Stimulus measures are focused on two phases – the first phase is extending credit to businesses and the second would be more targeted towards consumption and infrastructure and be more commodity-intensive,” the miner said.
Seaborne iron ore prices have seen significant swings since the end of January, supported in part by the gradual restart of businesses in China and persistent seaborne supply tightness while coming under pressure in the second half of February due to the sell-off in global equities markets following the spread of 2019-nCoV outside China.
Fastmarkets 62% Fe iron ore cfr China index averaged $82.44 per tonne in the week ended February 7 and rose to $90.98 per tonne in the week of February 21.
The index then fell to $88.10 per tonne in the week of February 28.
Fastmarkets 65% Fe iron ore cfr China index averaged $97.58 per tonne in the week ended February 7 and rose to $105.04 per tonne in the week of February 21 before retreating to $102.24 per tonne in the week of February 28.
Futures prices on Dalian Commodity Exchange and Singapore Exchange moved up, however, on Monday March 2 due to improved sentiment amid expectations of a stimulus roll-out by the Chinese government, following a record-low purchasing managers’ index for public and private sectors released over the weekend. China’s PMI figure for February fell to 40.3 from 51.1 in January and compared with the forecast of 46.1.
Even as seaborne iron ore prices have fluctuated, Chinese portside inventories remain subdued.
“Port inventory hasn’t built up a lot so material is still flowing. We are watching carefully how much steel is stuck in the value-chain but overall we have no problem in moving high-quality iron ore from Pilbara into China,” Rio Tinto said.