Must-know: Why Brazilian iron ore exports fell 9% in August

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Dec. 4 2020, Updated 10:52 a.m. ET

Brazilian exports

Brazilian exports show how much volume is shipped out of Brazilian ports to China and the rest of the world. Along with exports from Port Hedland, Australia, this is an important supply side indicator.

Brazil has a ~25% share in the global seaborne market. So it’s quite important for investors to keep an eye on the Brazilian iron ore exports data. This data is released by Brazil’s foreign trade department, MDIC, on a monthly basis.

Brazilian iron ore exports down 9% YoY in August

While the exports from Port Hedland are increasing with every reading, those from Brazil fell 9.3% year-over-year (or YoY) in August at 28.3 million tons, owing to the iron ore price weakness. But YTD (or year-to-date) exports remain quite strong at 5.3% higher YoY.

In value terms, exports fell 24.3% to $1.91 billion in August YoY. The volume fall was mainly a supply side response to the falling iron ore prices. But what remains to be seen is if this is a one-off event or a sustained trend.

How does this impact the iron ore names?

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This data doesn’t depict any particular trend in terms of the sustained fall in export volumes from Brazilian ports. But iron ore price decline leading to a fall in exports is a negative for iron ore names. This is particularly true for Vale SA (VALE) since it’s the largest iron ore exporter in Brazil. Other iron ore names like BHP Billiton (BHP) and Rio Tinto (RIO) have maintained the export volumes for now.

Although the bulk of the Cliffs Natural Resources‘ (CLF) production is for the U.S. only, its international segments engaged in seaborne exports are getting negatively impacted. Plus, lower prices overall are negatively impacting the company’s performance.

A broader approach for participating in this sector without picking individual companies would be to look at the SPDR S&P Metals and Mining ETF (XME).

To read more about the iron ore industry and the iron ore players, see Market Realist’s series Must-know: An overview of the iron ore industry.

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