Posted on 18 Apr 2019
Seaborne iron ore prices slumped on Wednesday after Vale announced the imminent restart of the Brucutu mine. Futures markets began pricing in the added supply as soon as markets opened.
The Kallanish KORE 62% Fe index slipped $1.01/t to $94.07/dry metric tonne cfr Qingdao. On the Dalian Commodity Exchange September iron ore settled down CNY 20/t at CNY 625.5/t ($93.26/t), while on the Singapore Exchange May 62% Fe futures settled down $1.72/t at $90.26/t. In Tangshan, billet prices slipped CNY 20/t to CNY 3,540/t.
Iron ore futures markets tanked on Wednesday on the back of Vale’s notification that it could restart the 30 million tonne/year Brucutu mine within 72 hours (see separate article). Vale had said in March that it could restart the mine, only to say after a few days that it no longer expected to restart imminently.
Vale itself added to the confusion in its announcement, saying that it did not plan to change its iron ore shipment guidance from 307-332mt in 2019. It had previously said it would target 382mt of sales in 2019. It justified this by saying there had been heavy rains which impacted shipments from its northern system. Futures markets clearly did not think much of these numbers, and appear to be pricing in higher output from Vale.
News of the restart was more than enough to outweigh the confirmation by BHP that its output was hit bit around 6-8mt because of Cyclone Veronica. Rio Tinto also cut its production guidance for 2019 by 5-8mt on Tuesday. On balance, the unexpected Brucutu restart means iron ore supply looks much less tight than it did at the start of the week.
