Minas Gerais Suspension On Brucutu Mine Pushed Iron Ore Prices In The International Market

  • May 07, 2019 AEST
  • Team Kalkine
Minas Gerais Suspension On Brucutu Mine Pushed Iron Ore Prices In The International Market

Iron ore prices rose in the international market amid suspension of shackled Vale’s Brucutu mine once again, which is again estimated by the market participants to create a supply disruption.

The prices previously fell over the arrival of shipments from Brazil and lesser decline in Chinese port inventories.

The prices at Dalian Commodity Exchange (DCE) settled at RMB 638 (as on 6th May), down by 0.16% as compared to its previous close; while the prices of the international benchmark- Iron ore fines 62% Fe (CME) closed at $93.81 (as on 6th May 2019), unchanged as compared to its previous close.

However, the prices again gained momentum in the international market after a court of Minas Gerais suspended its previous decision to grant vale the permission to operate its Brucutu Mine, which was banned initially over the dam collapse in Brazil.

The prices fell previously over the entry of Brucutu in the supply chain.

The decision by the court to suspend the permission of restarting the Brucutu Mine raised optimism among market speculators, who reckoned the decision to disrupt the supply chain again and the prices surged by 0.61%; the commodity is currently trading at $94.3 (as on 7th May 2019, GMT-5, 1:29 am).

On the demand side, the steel inventory in China is still not significant; however, mills in Tangshan are marking suspension of sintering activities, which in turn, is exerting pressure on iron ore demand. Other provinces in China are still not engaged in the procuring activities, as mills in China stockpiled an ample amount of the steelmaking raw material prior to the Labour Day holidays in China.

Another factor which is estimated by the market participants to hamper the demand for iron ore is the resumption of the bilateral disagreement between the United States and China after a hiatus. The U.S-China trade war has contributed towards a slowdown in the global economy and is once again expected to do the same if no resolution is reached.

As per recent official sources, United States would move forward with the president’s decision to increase the current tariff on $200 billion worth of Chinese goods from 10% to 25%. This is further expected by the market participants to escalate the situation, and the market is currently waiting for the counter actions from China.

Further, Chinese ports are dropping the Freight rates as well. As per the data, the freight rate from Brazilian port (Tubarao), declined by 0.84% and closed at US$15.65 a tonne (as on 6th May), and freight rate from Western Australia declined by 12.51% to mark a close of US$6.58 a tonne (as on 6th May).

The decline in freight rates signifies less import and high export scenario across the Chinese ports, which in turn, could further offset the fall in Vale’s supply along with the absence of any significant demand in China.


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