The world’s top two iron ore miners struggled to keep up with strong Chinese demand in the first quarter of 2021, hit by operational challenges and weather disruptions, in a positive sign for prices that are already at decade highs.
Brazil’s Vale SA churned out less ore than expected last quarter after lower productivity at one mine and a ship loader fire, with its recovery from an early-2019 tailings dam disaster proving a little slower than expected. Rio Tinto Group’s shipments were disrupted by wetter-than-average weather at its Pilbara operations in Western Australia.
Benchmark iron ore surged Monday over $180 a ton -- the highest since May 2011 -- following news that China’s crude steel production jumped 19% last month from a year earlier to near a record. The nation’s output of the alloy is booming at the same time as a pollution crackdown has lifted prices and benefited profit margins at mills.
“With the market relatively tight at the moment, it will certainly see any failure to meet current guidelines as relatively positive for the price,” said Daniel Hynes, senior commodities strategist at ANZ Banking Group Ltd. Vale and Rio both maintained their forecasts for full-year production, though a slower-than-expected recovery at Vale could see the market reset its expectations, he said.
Rio cautioned that its guidance for annual output of up to 340 million tons was subject to logistical risks associated with bringing 90 million tons of replacement mine capacity on stream. It also said that Tropical Cyclone Seroja had impacted its Pilbara mine and port operations in April.
