The seaborne iron ore price hit a five-year high of over $100/dry mt Friday on reduced supply from big miners and low inventories at steel mills.
S&P Global Platts assessed the 62% Fe Iron Ore Index at $100.40/dmt CFR North China Friday, up $2.40 from Thursday, and up $28.05, or 38.8%, so far this year.
Brazilian mining company Vale estimates iron ore sales volume between 307 million mt and 332 million mt for 2019 depending on operations at its Brucutu mining complex following the collapse of the Laranjeiras tailings dam on March 18. The miner shipped 55.41 million mt iron ore fines in the second quarter, down 22.2% from Q1 as a result of the dam collapse.
Rio Tinto said on April 1 that its iron ore production in 2019 would be cut by about 14 million mt due to cyclone hit Western Australia, and BHP cut iron ore supply guidance by 6 million-8 million mt in 2019.
Steel mills were not prepared for a cut in iron ore supply, traders said.
"Steel mills have been keeping iron ore inventories low and only buying hand-to-mouth from Chinese ports to accommodate steel production," a Shanghai-based trader said.
Dockside iron ore inventories fell by over 20 million mt so far this year on less supply and strong demand from end-users.
China's crude steel output in April hit a record high of 85.03 million mt, up 12.7% on the year, according to the National Bureau of Statistics.
"That says iron ore is in demand. The use of scrap is likely to go down this year on less strict environmental controls and lower steel margins," a Chinese trader said.
Market participants said that seaborne iron ore supply is tight, and spot offers for June and July loading cargoes are limited.
Although China increased domestic iron ore production this year, it is still far from meeting end-users' needs.
A shortage of Brazilian's iron ore fines meant low-alumina cargoes regaining popularity in Q2.
Platts assessed alumina differentials of 1%-2.5% at $6/dmt Friday, compared with the lowest so far in 2019 of $1.50/dmt on January 22.
Source: S&P Platts