After starting the current week at the average price level of $87.1/mt CFR China, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port reached $90/mt CFR China today, April 3, due to a worsening of the iron ore supply shortfall which had begun to be observed as of January. On the other hand, export offers for high quality iron ore with 65 percent Fe content from Brazil are standing at $ 101.72-102.62/mt CFR China.
Meanwhile, iron ore futures prices at Dalian Commodity Exchange have reached a two-year high after moving up by five percent since the beginning of the current week. According to the latest announcement by Brazil’s National Mining Agency, mining inspections in the country have been increased, while after the inspections 17 of Vale’s 56 tailings dams have been ruled unsafe by court order and 39 mines have been closed due to incomplete safety documentation.
The crisis in global iron ore supply has deepened with the disruptions of shipments of Australian miners BHP Billiton and Rio Tinto resulting from the tropical storm which affected Australia in past weeks. The storm has caused a supply cut of 6-14 million mt, thereby providing support for the increasing trend of iron ore quotations. The resulting supply gap in Australia is expected to be filled in the short term, but, to resolve the problem of tighter global iron ore supply in the medium and long term, the output shortfall in Brazil would need to be resolved permanently. However, large miners such as Fortescue have underlined that they cannot accelerate their mining operations fast enough to fill the gap which has opened in iron ore supply. In the short term, iron ore prices in the international markets are expected to remain at high levels.