Iron Ore Prices On Fire Amid The Development Of Cyclone Wallace

Iron Ore Prices On Fire Amid The Development Of Cyclone Wallace

Iron ore prices spiked again amid supply concerns of supply shortage in the global market. The benchmark Iron ore fines 62% Fe (CME) settled at $89.50 and seems well on its way to cross the $90 mark. Another benchmark iron ore fines 62% (DCE) settled at RMB 690.50 (as on 3rd April), up by 4.23% as compared to its previous close.

The factor which supported the iron ore prices earlier was the concern of supply disruption, caused by the Tropical Cyclone Veronica in Pilbara Region, which led the production loss (current as well as forecast) of major iron ore producers.

Iron ore prices are marking a rally for quite some time over the supply disruption caused by various factors. The initial rally in iron ore prices started, when a court in Brazil suspended the world’s largest iron ore producer Vale’s operations over a dam collapse in Brazil, which used the iron ore product from the Brucutu mine of the company.

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The initial ban on the company was soon followed by the high scrutiny on the company, which led further bans on various other projects and mines which disrupted the supply. The ban on Vale and its iron ore output supported the iron ore prices. Though, the company has resumed its production, but it has downgraded its production guidance for the year 2019, which in turn has supported the iron ore prices.

Soon after Vale, a cyclone named Veronica in Pilbara region caused various significant iron ore producers to halt the operation in the region, which in turn, created further supply shortage and boosted iron ore prices.

The World’s second largest iron ore producer, Rio Tinto (ASX:RIO) declared a production loss (14 MT per annum) amid the damages caused by the cyclone to its Camp Lambert port. Apart from Rio, another significant Australian iron ore producer, BHP (ASX: BHP) declared a production loss of 6 to 8 million per annum as the cyclone damaged the Rail operations of the company.

The production cut from major iron ore producers around the globe supported the iron ore prices and set the iron ore prices ablaze.

In a recent event, the iron ore prices are again expected by market participants to skyrocket as another Tropical Cyclone named Wallace is expected to hit the Pilbara region. The cyclone is forecasted by various weather forecasters to impact the Port Hedland badly.

Port Hedland is already marking a suspension of port docking and ship loading activities due to high tide caused by Veronica in the river Turner.

The suspension of activities at the port by the port authorities have already marked an impact on the delivery of seaborne iron ore across Chinese ports, and further development of the Cyclone Wallace is expected to widen the delivery gap.

The supply shortage in the global market came to the limelight at the time of high demand from Chinese domestic mills on the expectations of ban removals by the Chinese local government.


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