Labrador Iron Ore Royalty Corporation (LIORC) announced its operation and cash flow results for the first quarter ended March 31, 2021.
In the first quarter of 2021, LIORC's financial results benefited from higher iron ore prices and pellet premiums, partially offset by lower volumes of pellet sales. Royalty revenue for the first quarter of 2021 amounted to $65.2 million compared to $47.6 million for the first quarter of 2020. Equity earnings from Iron Ore Company of Canada (IOC) were $57.0 million in the first quarter of 2021 compared to $24.7 million in the first quarter of 2020. Net income per share for the first quarter of 2021 was $1.35 per share, which was an 86 percent increase over the same period in 2020.
In a press release, the company said increased demand for iron ore by steel producers and a lack of expected growth of supply led to higher iron ore prices in the first quarter of 2021. Increased steel demand, partly as a result of stimulus spending on infrastructure and construction, resulted in higher steel prices and strong profit margins for steel producers, which in turn translated to increased demand for seaborne iron ore.
According to the World Steel Association, global crude steel production in the first quarter of 2021 increased 10 percent over the first quarter of 2020, and crude steel production in China, which accounts for over 70 percent of all seaborne iron ore demand, was 16 percent higher in the first quarter of 2021 compared to the same quarter of 2020. At the same time, the expected growth in supply of seaborne iron ore did not materialize as the world's three largest suppliers of seaborne iron ore all reported lower production in the first quarter of 2021, compared to the last quarter of 2020. Iron ore production by Rio Tinto and BHP was lower by 11 percent and 5 percent, predominantly due to adverse weather in Australia, and iron ore production by Vale was lower by 19.5 percent, predominantly due to maintenance work at its S11D mine.
As for an outlook, the company said the price outlook for seaborne iron ore remains robust. Since the end of the first quarter iron ore prices have strengthened. So far in April (April 1, 2021 to April 28, 2021), the average price of the 65 percent Fe index has been US$210 per metric ton, or 10 percent higher than the average of the 65 percent Fe index for the first quarter of 2021. The pellet premium for April was US$66 per mt compared to the average of US$43 per mt in the first quarter of 2021.
With a possible global economic recovery and a positive outlook for domestic growth in China, the near-term outlook for global steel production looks positive, the company said, adding that while there is expected to be some increase in the supply of seaborne iron ore over the remainder of 2021, any increase should be absorbed by the strong demand. In addition, as a result of higher steel prices and strong profit margins and in order to keep up with the downstream demand for steel, steel producers are utilizing higher grade iron ore products, like those sold by IOC, in an effort to prioritize production efficiency.