A surprise spike in iron ore prices this year is shaking out fresh supplies of the steelmaking raw material, but some miners say it is too soon to aggressively restart production shuttered by a years-long price rout.
Iran said it has increased shipments to top iron ore consumer China, while traders have also seen more cargoes from India and Malaysia as material kept idled in warehouses and ports is pushed out to buyers to take advantage of the price spurt, Reuters reported.
Iron ore ended January-March with a 24$ gain after pushing above $50 a ton, far outpacing gold that had its best quarter in three decades.
The steelmaking raw material is still the top performing commodity this year, despite falling 16% from last month’s peak, but the wild swings have kept miners wary about the longevity of the price recovery.
“The trade signals are not strong enough yet for a sustainable lift in demand,” said UBS commodities analyst, Daniel Morgan.
Still, in Iran, vessels loaded with iron ore bound for China have increased “remarkably”, Keyvan Jafari Tehrani, head of international affairs at the Iron Ore Producers and Exporters Association of Iran, told Reuters.
“When the price of iron ore rose above $50 a ton, the number of shipments to China increased and if it stays above $55, more mines will resume production,” said Tehrani.
Iran is the sixth-biggest iron ore exporter to China, but shipments fell 40% last year to 13.2 million tons as prices tumbled. Around 70% of private iron ore mines in Iran shut in the past two years due to the market rout, Tehrani said.
“We also heard some Malaysian cargoes being quoted in the market which we haven’t seen in a while. If the price is right there’s a market for them,” said a Shanghai-based iron ore trader.
The trader is keen on buying some cargoes from Indian suppliers who have become active in the market in recent weeks as prices climbed.
India used to be a major iron ore exporter to China until court-imposed mining curbs in a crackdown on illegal extraction halted shipments. Mining in the western Goa state, India’s top iron ore exporter, resumed in October after a three-year gap.
But Goan miners say a 20-million-ton annual production cap will limit any benefit from strong prices. Shipments from Goa reached about 50 million tons in 2010-11, during iron ore’s boom years when it reached nearly $200 a ton.
The price rise is a boost for miners such as global giants Rio Tinto and BHP Billiton, where every one dollar a ton price hike over a year is worth roughly $250 million, according to UBS.
But small miners say it is too early to restart idled output.
“It’s not easy to turn mines on and off. If you’ve demobilized staff and equipment, it’s no easy feat to suddenly bring it all back, particularly in the absence of real proof these prices are sustainable,” said an executive for a smaller-sized Australian iron ore company.
Lower ore grade producers, such as Malaysia, are under more pressure and say the rally needs to go further.
“When iron ore was at $80, low grade iron ore could fetch around $60. At current prices, it’s still not viable for Malaysian iron ore,” said a geologist at a Malaysian-based mining company.
Source: Financialtribune
