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Should Iron Ore Investors Brace for More Downside?

PART:
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Part 3
Should Iron Ore Investors Brace for More Downside? PART 3 OF 10

Outlook for Iron Ore Shipments Is Strong in 2017

Iron ore shipments

Iron ore shipments from major ports in Australia and Brazil (EWZ) are key indicators for investors. They represent the supply side of the iron ore equation. In this part of the series, we’ll discuss how shipments are shaping up for March 2017 and see how they’re expected to pan out for the rest of the year.

Outlook for Iron Ore Shipments Is Strong in 2017

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Iron ore exports impacted by adverse weather

In March 2017, 39.1 million tons of iron ore were exported from Port Hedland, a decline of 1% YoY (year-over-year). It was a gain of 9.6% month-over-month. However, comparing March and February may be misleading, as February has fewer days than March.

Iron ore exports to China totaled 31.5 million tons in March 2017. Major iron ore players BHP Billiton (BHP) (BBL), Fortescue Metals Group (FSUGY), Atlas Iron, and Rio Tinto (RIO) ship iron ore out of Cape Lambert and Dampier. Roy Hill, an iron ore project in Western Australia, started shipping iron ore in December 2015. The shipments for these companies were impacted in March 2017 due to bad weather and cyclones.

Meanwhile, iron ore exports from Brazil rose 20% YoY to 36.4 million tons. In 1Q17, export volumes were up 6.7%. Brazil’s iron ore exports are gaining momentum from Vale’s (VALE) new S11D project.

More supply to pressure prices

Australia and Brazil are typically the lowest-cost iron ore producers. Temporary and seasonal fluctuations aside, exports from these destinations are on the rise. Rising exports from these countries point to robust low-cost supplies. Low-cost supplies and additional ore don’t bode well for iron ore prices. In the next part, we’ll look at the iron ore inventory situation at Chinese ports.

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