BRASILIA: Iron ore exports from Brazil and Australia are expected to keep rising despite low prices and China’s falling demand, Goldman Sachs said in a report.
“Seaborne iron ore demand is peaking, and apparent Chinese steel consumption in the year to September is down almost 7%,” it said. “On that basis, rising exports are sustainable only as long as Brazilian and Australian ore is displacing product at the high end of the cost curve.”
It said low iron ore prices are leading suppliers to shut surplus capacity.
Platts 62% Fe Iron Ore Index, or IODEX, fell $2.05/dry mt, or 3.8%, week on week to $51.75/dmt Friday. However, freight for a Capesize cargo from Australia to North China rose 5.1% in the same period to $5.15/wmt, and freight for a Capesize cargo from Brazil to North China rose 11.7%, Platts data showed.
With Brazilian miner Vale and Australian miner Rio Tinto each targeting to produce 340 million mt of iron ore this year, the rising supply is likely to squeeze out smaller miners with higher costs.
The weak Brazilian real and cost improvements reduced Vale’s FOB costs to $12.70/mt in Q3, with Rio Tinto’s costs a few dollars higher.
“Domestic concentrates miners in China whose mining cost could be as much as $70-$80/mt can hardly survive in such oversupplied iron ore market,” said a Shanghai-based trader.
China imported 699.5 million mt of iron ore over January-September, steady year on year, according to customs data Friday. The China Iron and Steel Association previously estimated the country’s steel production peaked in 2014.
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