UK-Australian mining company BHP is expected to make up for lost iron ore shipments from Port Hedland over the remainder of this calendar year and stay on track to hit its July 2018-June 2019 guidance, following its derailment of a train earlier this month.
BHP derailed a train on 5 November after it left without its driver, which left the firm unable to deliver ore from its Pilbara iron ore mines to its port at Port Hedland. But it was able to resume partial deliveries on 10 November and has been able to ramp up rail services over the past week, despite some safety concerns related to the trains, which are becoming increasingly autonomous.
BHP filled 41 ships with a combined deadweight tonnage capacity of 8.36mn t between 6 November and 19 November, according to shipping data. It filled 53 vessels with a combined deadweight tonnage capacity of 10.73mn t in the same period in October. It filled 59 vessels with a combined deadweight tonnage capacity of 11.91mn t in the same period of November last year.
This implies that its loadings for 6-19 November this year are down by 22pc on the same period in October and by 30pc on the same period in November last year. While this may seem like a large fall, it is only over a two-week period and BHP should be able to make up for this over the next six to eight weeks, assuming there are no other technical issues and the weather remains benign, according to analysts and an examination of shipping data tracked by Argus.
BHP undertook major maintenance work on its Port Hedland facilities in July, which should put it in a good position to push extra tonnage through the port in the coming weeks. It also has spare capacity on its rail, having spent much of the past year debottlenecking the system. At the same time, stockpiles at the mines will have been built up to ensure swift supply of ore into the rail system as soon as it is back up and running.
There are around 40 ships waiting off Port Hedland, which is just less than a week's worth at normal loading levels for the port and should mean that there is no shortage of vessels to load as BHP pushes to catch up on the lost tonnages ahead of the wet season in the Pilbara region.
The Australian Bureau of Meteorology is predicting a milder-than-average wet season for Western Australia this November-April, with the likelihood of fewer-than-average cyclones making landfall. Port Hedland is at the moment more at risk from bush fires because of hot dry weather than from flooding or cyclones.
BHP made no shipments to Japan in 6-19 November compared with around 1mn t during the same period of October this year and of November last year. This might just be because of shipping schedules or it could be that Japanese customers — many of whom have strong relationships with BHP — were more willing to wait than Chinese or South Korean customers.
BHP produced 69.34mn t of iron ore in the Pilbara region during July-September on a 100pc basis, up by 10pc from a year earlier but down by 3pc from the previous quarter. The firm's production forecast for July 2018-June 2019 is 273mn-283mn t, meaning it only has to maintain production at levels achieved in July-September to hit the middle of its production target for 2018-19.
The slight dip in production in July-September compared with April-June was less pronounced than expected, given the maintenance at its port facilities at Port Hedland in July.
The Argus ICX 62pc seaborne fines index is at $75.65/dmt, down from $77.80/dmt on 9 November, ahead of BHP reopening its rail system on 10 November.
