Australia’s iron ore exports to drop for first time in 18 years

Bloomberg

Iron ore exports from Australia are set to post the first annual drop in almost two decades following bad weather and output setbacks, worsening a global shortage and bolstering prices that have already surged to a five-year high.
Futures advanced.
The world’s top shipper cut its 2019 forecast to 814 million tons from 867 million in March and boosted its estimate for this year’s average price by almost 20 percent, according to a report by the Department of Industry, Innovation and Science. That would be the first contraction since 2001. Last year, Australian exports totalled 835 million tons.
Iron ore has soared above $100 a ton, driven by the twin forces of supply disruptions in Brazil and Australia and strong demand from steel mills in China.
This will push the value of Australia’s exports to $55 billion in fiscal 2020, reflecting higher prices that are largely due to Vale SA’s dam disaster in January.
“The iron ore price is expected to be higher than previously forecast due to the limited capacity of other operations in Australia and elsewhere to ramp up and replace Vale’s production loss of high-grade supply, at least in the short term,” the report said.
On Monday, futures on the Singapore Exchange surged as much 6.3 percent to $120 a ton, the highest since 2014, while the contract in China jumped 4.1 percent. Benchmark spot ore was last at $118.05 a ton, according to Mysteel Global.
Rio Tinto Group and BHP Group both revised down their annual production outlooks in the wake of Cyclone Veronica in the first half, and Rio in June further lowered its output target after problems at its sprawling operations in Western Australia.
“The seaborne iron ore market is thus likely to stay tight, and prices elevated, out to at least 2021,” the report said.
Global seaborne iron ore supply is forecast to decline by 4.1 percent to around 1.5 billion tons in 2019, driven by events stemming from the dam collapse, the report said. Vale’s production is expected to recover over the next three years, with the full recovery in its production hinging on 60 million tons of production associated with use of tailings dams, the department said.