iron ore was traded in triple digits – May 2014

Top iron ore producer Vale’s decision to decommission its upstream tailings dams following the deadly dam burst on Friday at its facility in Córrego do Feijão, Brazil has lit a fire under iron ore prices.

The Chinese import price of 62% Fe content ore jumped 5% on Wednesday to trade at $82.53 per dry metric tonne, according to data supplied by Fastmarkets MB. The price of the steelmaking raw material is now up more than 13% year to date. The index price for high-grade (65% Fe) Brazilian ore gained $5.40 to reach $97.60 a tonne.

Domestic Chinese prices also surged, with the most actively traded iron ore futures contract on the Dalian Commodity Exchange hitting its daily uplimit to finish Wednesday nearly 6% higher at 587 yuan ($87.40) per tonne, a 17 month high.

Vale’s plans to halt production at 10 operations, cutting its annual output by some 10% or 40m tonnes, upending a market that was expected to experience a year of gentle decline.

 

Triple Digits:

As for the “outsized” shorter term impact on spot prices, Reuters quotes Singapore-based analytics company Tivlon Technologies as saying prices will hit $120 a tonne by August, from a projected $95 a tonne by May. The last time prices were in triple digits was May 2014.

The shares of iron ore majors benefited from Vale’s decision with US-based Cleveland-Cliffs leading the charge higher. Cliffs, which operates five mines in Michigan and Minnesota (one of which is idled) with annual production of 18.8m in 2017, jumped more than 17% bringing the company’s year to date gains to 40%.

Rio Tinto gained 2% in New York trading. The Anglo-Australian giant is closing in on Vale’s annual output figures, targeting 350m tonnes this year from its Pilbara operations. Melbourne-based Rio this year will start construction of its Koodaideri mine with annual capacity of 43m tonnes this year.

Click here for complete coverage of the dam burst at Vale’s Córrego do Feijão mine.