Brazil’s iron ore exports
Brazil accounts for about 25% of the global market share of iron ore’s trade volume. After Australia, Brazil is the second-largest iron ore exporting country in the world. In 2014, Brazil’s iron ore exports accounted for 18% of China’s overseas purchases—compared to 19% in 2013.
As a result, Brazilian iron ore exports are a key metric for investors to watch—along with shipments out of Australia. The Brazilian Ministry of Development, Industry and Foreign Trade releases this data on a monthly basis. Vale SA (VALE) is the major iron ore producer in Brazil.
Brazil’s exports are weak
Brazil’s iron ore exports were also weak in May—compared to last month and last year. Brazil exported 27.69 million tons in May 2015—compared to 28.74 million tons in April 2015. This is a month-over-month drop of 3.6%. On a YoY (year-over-year) basis, exports dropped by 9.8%.
Implication for iron ore prices
Although overall iron ore consumption is weak in China, Brazilian iron ore exports are losing more ground than Australian iron ore exports. The proportion of Brazil’s iron ore exports is declining in Chinese consumption. This hurts Vale more than BHP Billiton (BHP) (BLT) and Rio Tinto (RIO).
A decrease in prices due to supply glut negatively impacts other producers like Cliffs Natural Resources (CLF). It also negatively impacts the iShares MSCI Global Metals & Mining Producers ETF (PICK). BHP Billiton accounts for 17.9% of PICK’s holdings. The SPDR S&P Metals & Mining ETF (XME) also invests in some of these stocks.
In the next part of this series, we’ll see how the Chinese iron ore inventory at ports is declining amid lower shipments.