Overall supply flatlines for four years
No meaningful supply growth seen in 2021
Iron ore exports from Australia and Brazil are always lower in the January-March quarter due to weather factors, but they were particularly weak in 2021 -- and that tepid performance was compounded by a further decline in April.
Australia's Fortescue Metals Group shipped the same volume in calendar Q1 as it did a year ago, while BHP's exports were the weakest for two years and Rio Tinto's were the lowest in a year.
Brazilian Vale's iron ore and pellet exports fell 25 million mt in calendar Q1 from the December quarter due to operational issues and maintenance at its S11D mine, according to company reports.
S&P Global Platts Analytics' trade flow software cFlow shows that shipments from the four majors, plus Australia's Roy Hill and Saldanha port in South Africa, totaled 273.3 million mt in Q1. This was around 40 million mt lower than in Q4 2020, with Vale responsible for half of the lost volume.
With little new tonnage due out of Australia this year, the burden is placed on Vale to lift its supply. However, Brazil only supplies around 20% of China's overall imports, compared with Australia's more than 60%.
In the meantime, China's crude steel output is growing at around 16% so far this year. Therefore, even if Vale is able to lift its contribution in 2021, it is unlikely to make much impact on overall price levels. With seaborne prices above $200/mt CFR China for the first time in history at the time of writing, it would seem that fundamentals are only part of the equation.
In April, shipments from producers in Australia, Brazil and South Africa fell 5.4% month on month to 92.27 million mt, and were down 2.6% year on year, according to cFlow. All the miners reported declines in the month, with Rio Tinto's exports falling by 12%. May is seasonally a stronger month for supply, after cyclone season in Australia.
Four flat years
The producers' quarterly shipments chart shows exports have remained largely flat for four years. The ramp-up of Vale's S11D mine brought a big lift in the second half of 2018, but exports fell again in early 2019 due to the Brumadinho tailings dam incident.
Rio Tinto's strongest quarter for exports was more than three years ago; it has posted very weak Q1 exports due to operational issues in both years since. Looking at the iron ore industry's export performance over the past four years inspires little confidence that there will be any notable uplift in 2021.
Further, with all the tie-in work and commissioning of new mines in Western Australia due in the next two years, more delays and supply disruptions can be expected. This is why Platts Analytics remains bullish about iron ore price levels for the next 2-3 years.
Source: S&P Platts