After Rio, Veronica Now Hits BHP; Company Estimates 6 To 8 Million Tonnes Production Loss

BHP Group Limited (ASX: BHP) announced on 2nd April 2019 that the company’s Port and Rail Operations are ramping-up and the initial inspection of the project site in the region, revelled no major damage. The operations were initially on a temporary suspension due to the Tropical Cyclone Veronica, which passed through the Pilbara region forcing the companies to suspend the operations in the region.

BHP updated no major damage to the operations; however, as per the company’s announcement on the Australian Stock Exchange, its Rail Operations in Port Hedland will take some time to return to full capacity as isolated flooding on both site and sections chocked the rail, which leads into the port, which in turn caused limited train movement and hampered the Rail Operations.

As per the company, the Port Hedland is operating at reduced rates and is not expected by the company to reach the full capacity till later of April.

The company also reported the effect of reduced port activities and flooded rail and mentioned an estimated production loss of 6 to 8 million tonnes.

The estimated production cut of 6 to 8 million tonnes per annum will likely to impact the production guidance and unit cost guidance of the company for the financial year 2019, and as per the announcement, made public by the company, BHP is currently reviewing the production and unit cost guidance.

The company will disclose the final production impacts and revised production and unit cost guidance once BHP completes the final assessment.

BHP estimated production loss is below the competitor Rio Tinto’s (ASX: RIO) declared production loss of 14 million tonnes per annum. In the absence of both significant Australian Iron ore miners, i.e., BHP and Rio Tinto, the Brazilian rival Vale is all set to cash in the opportunity.

Brazilian behemoth iron ore producer, Vale, was in shackles over the case of dam collapse in Brazil which used Vale’s product. The incidence led to a suspension of activities in the Brucutu mine of the company by the court in Brazil.

The suspension on the major mine of the company followed by various other such suspensions led the Australian miners to leap forward and take advantage of high iron ore prices, amid production loss from Vale.

However, now the giant iron ore producer Vale has restarted its Brucutu mine and the production loss by these Australian miners, might support the rival group.

On the port front, Port Hedland docking activities are also on a temporary suspension as a regional rainfall coupled with the cyclone caused high-tides in river Turner, which led the port authorities to shut the ship loading activities. The loading activities are expected to resume in coming weeks.

The overall scenario might be pointing towards a supply deficiency in the global market; however, the magnitude of the supply gap will depend upon the production capacity of Vale’s operations. Iron ore market is currently on a surge as supply concerns dominate in the global market over the production loss from top Australian iron ore producers.


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