Prices drive marginal Australian iron ore shipments

Market: Metals
30/04/19

Higher iron ore prices, particularly for lower grade ores, are stimulating a supply response from smaller Australian producers, with Mineral Resources and Mount Gibson both returning to fines stocks previously considered uneconomic.

While the large-scale Pilbara iron ore mining firms, BHP Billiton, Rio Tinto and Fortescue were forced to cut production guidances because of Cyclone Veronica, smaller firms are increasing shipments to take advantage of firmer prices.

Mineral Resources is planning to increase output from its Koolyanobbing mine in the Mid West region of Western Australia (WA) to 8mn t/yr from 6mn t/yr, and has increased shipments of stockpiled fines from its Iron Valley mine in the Pilbara. Mount Gibson, which last week started shipping from its high-grade Koolan Island mine offshore WA, is also preparing to start shipments of low grade stocks from its recently closed Mid West operations. Both firms had previously expected to leave their low-grade stocks as they were because it was uneconomic to ship them at lower prices.

Argus last assessed the 58pc Fe price at $85.25/t cfr Qingdao, up from $57.70/t five months ago. It assessed its ICX 62pc Fe price at $93.50/t cfr Qingdao, up from $64.55/t over the same period.

Mineral Resources shipped 3.31mn t of iron ore during January-March, up from 2.3mn t a year earlier and from 2.35mn t for October-December. It shipped 640,000t more ore than it produced, largely because of it drawing down on previously uneconomic stocks. The firm produced 2.67mn t during January-March, down from 2.69mn t a year earlier and up from 2.33mn t for October-December.

The firm lifted output from its Koolyanobbing mine, which it restarted last year, having bought the mine from US mining firm Cleveland Cliffs in June. Koolyanobbing shipped 1.52mn t during January-March, up from 292,000t in October-December, putting it well ahead of its target of shipping 1.5mn-2mn t in the year to 30 June. The mine has been operating so well that Mineral Resources is now planning to take advantage of the firm price environment by increasing production to 8mn t/yr from 6mn t/yr by July-September.

Mineral Resources' Iron Valley mine increased shipments to 1.79mn t during January-March, despite producing just 1.37mn t as stocks were run down. This compares with production of 1.8mn t and shipments of just 1.54mn t in the year earlier period when prices were depressed.

Mount Gibson shipped just 400,000 wet metric tonnes (wmt) of ore form its Mid West operations in January-March after it closed its mining operations in February. This compared with 1.01mn wmt during October-December and 977,000wmt for January-March last year. The firm had expected to cease shipments from the Mid West this quarter, but firm prices prompted it to reconsider and it now plans to spend around six months from June shipping remnant stocks of low-grade material from the region.

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