IRON ORE WEEK: Key talking points for the market
Key talking points in the iron ore market before the annual Singapore Iron Ore Week, which takes place on May 6-10, 2019.
Will Brazilian iron ore supply fall short significantly, and if so when?
There have been market concerns over the potential short supply of Brazilian iron ore since Vale’s tailings dam accident in late January and the following operation suspensions.
While ex-China markets have felt the pinch of reduced supply like pellets from Vale, Chinese steelmakers have so far stayed relatively cool on low-alumina Brazilian fines, given the cushion of port stocks in China and availability of low-alumina domestic concentrate.
However, iron ore shipments from Brazil have significantly slowed down since April, partly due to heavy rains in north Brazil. Based on the 45-day voyage from Brazil to China, Chinese buyers may start to sense tighter supply from the second half of May.
Will further supply disruption happen from Australia following Cyclone Veronica?
Cyclone Veronica hit Western Australia late in March, causing port closures and logistics facilities damage, which both affected iron ore shipments. Both Rio Tinto and BHP lowered their iron ore production guidance for their current financial year.
Shipment data shows that Australian iron ore supplies have been recovering in April and some sources said the miners have been trying to catch up on original shipping schedules. However, others fear there could be overhauls later that could have an impact on supplies later in the year.
How far can Chinese steelmaking profits go and how sustainable are the higher margins?
With a notable pick-up in steel prices in April, Chinese steelmakers’ profit margins have quickly widened above 500 yuan per tonne, leading them to refocus on productivity compared with cost in choosing iron ore.
But will such profitability widen further or will steelmakers come under pressure, for example when the rainy season comes in eastern China in June?
And how big a role will China’s domestic iron ore supply play in 2019’s market?
Iron ore prices above $90 per tonne cfr and fewer restrictions on mining and concentratng operations this year have led to an increase in China’s domestic iron ore concentrate supplies.
After capacity shutdowns in previous years, however, there may be limited potential left for the domestic concentrate production to ramp up further, some said.
How much more impact will China’s emissions restrictions bring to the steel and iron ore markets?
While the latest steelmaking emissions restrictions have turned out to be less onerous than last year’s winter heating season, there have still been various interim curbs on production in different parts of the country potentially causing further disruption.
Market participants expect Beijing’s implementation of pollution-control measures to be generally stricter year on year, but it remains to be seen how the policies will actually be put in place.