The substantial surge in seaborne iron ore prices over the first half of 2019 and its persistence at over $100/dmt since June 10 have triggered more investments in non-core iron ore projects such as in Australia, Mexico, Canada, Norway, and Indian suppliers are closely monitoring the Chinese mills’ appetite for iron ore too, market sources shared the observation on Thursday.

Supply disruption from the world’s top iron ore miners in both Brazil and Australia since Vale’s tailing dam collapse on January 25 has aroused the market concern on global iron ore supply, and Mysteel’s 62% Australian iron ore fines price index have been on a uptrend ever since the beginning of 2019, hitting its five-and-half-year high of $127.15/dmt on July 3 from $72.25/dmt on January 2, in term of CFR Qingdao.

“Major iron ore miners’ supply disruption while China’s robust iron ore consumption are both music to investors and owners of non-mainstream iron ore projects, prompting them to take the opportunity to bring some such supplies to the market for rather attractive margins,” a Shanghai-based iron ore analyst commented.

News on small-sized iron ore miners’ plans to resume their iron ore operations or invest in small-scales mines especially that just take a few months to come online have been frequently reported, and among the recent is the Perth-based Strike Resources that announced on July 15 a maiden resource of 9.1 million tonnes of iron ore with Fe content at 63.4% at Paulsens East iron-ore project in the Pilbara, Western Australia, and aims to fast-track its development within the next nine months.

Encouraged by the substantial iron ore price rebound, the prospective mining company, will start with a 2 million tonnes of 62% grade potential direct shipping ore material with China being the primary market, it disclosed, and other than the Paulsens East project, Strike Resources also owns the high-grade Apurimac and Cusco magnetite iron ore projects in Peru, South America.

China’s demand for iron ore has been supporting the efforts in exploring new iron ore source globally too, as the country’s steel output grew 9.9% on year to 492 million tonnes over January-June.

Over January-April, iron ore miners in Australia other than Rio Tinto, BHP and Fortescue Metals Group contributed to an added 1.03 million tonnes of iron ore exports to China compared to the same period of last year, and iron ore exports from countries other than the top four countries (Australia, Brazil, South Africa and India) grew 1.07 million tonnes on year for the first four months, a Beijing-based analyst shared his monitoring.

The known supply gap into China because of the reduction from the low-cost iron ore from the world’s top four miners, therefore, will be very likely to be filled by some high-cost non-mainstream iron ore miners, he estimated, adding that newly-added quantities from countries other than the top four countries may total 15.9 million tonnes for the whole 2019.

A second Shanghai-based analyst pointed out that the increased supply from the non-mainstream iron ore suppliers will need to be closely monitored for the possible impact on prices in the second half of 2019.

“We estimated a total 60 million tonnes of iron ore output will be added to the global seaborne market from miners other than the top four miners,” he remarked.

China’s demand for iron ore may stay strong as Mysteel’s latest weekly report showed that the blast furnace capacity utilization among the 247 blast-furnace steel companies across China eased modestly to 80.43% over July 12-18 during to recent restrictions on steel mills in Tangshan and Handan of North China’s Hebei.

The utilization rate has been persisting at a rather high level of over 80% since mid-April and once hit a 85.05% over May 31-June 6, a record high since Mysteel commenced the survey in January 2013, according to Mysteel’s data.

Written by Victoria Zou, zyongjia@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com