With total year-over-year losses of 5 per cent recorded among global iron ore producers in Q1 2019, the seaborne iron ore market is expected to fall into a larger deficit this year than previously anticipated.

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Total iron ore production at Vale SA's operations has fallen by 11 per cent to 73 million tonnes (Mt) year-on-year in the first quarter of 2019, following the Brumadinho dam collapse – that’s according to company reports cited in the latest S&P Global analysis produced by S&P Global Market Intelligence, S&P Global Platts and S&P Global Ratings. As a result of disruption, the seaborne iron ore market is expected to fall into a larger deficit this year than previously anticipated.

 

“Seaborne iron ore deficit is expected to widen to approximately 40Mt this year due to disruptions at key global mines,” advised Maximilian Court, Senior Commodity Analyst at S&P Global Market Intelligence. “We believe prices for iron ore are likely to remain elevated, due to a number of factors including lower levels of stocks, greater disruption and a change to penalties for alumina.”

 

Production disrupted in Australia and Brazil

 

Data from Panjiva, the supply-chain research unit at S&P Global Market Intelligence, shows that Vale’s exports of iron ore from Brazil have fallen by 34 per cent to 16Mt year-on-year in March – the lowest since 2014 – as a consequence of multiple mine closures.

 

S&P Global Market Intelligence lowered Australian and Brazilian iron ore production expectations by 16Mt and 54Mt, respectively, following widespread disruption due to operational challenges and cyclone damages.

 

Alumina levels and penalties on the rise

 

Due to reduced output of iron ore, end users are looking to secure seaborne cargos with lower alumina because of robust demand and attractive steel margins. 

 

S&P Global Platts observed a rise in alumina levels and penalties following the accident, with alumina penalties having tripled and reached a 2019-high on 16th May. In addition, bids and offers were observed for other lower-alumina midgrade alternatives, as well as lower-grade, lower-alumina options.

 

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