Port Hedland iron ore exports
Iron ore exports from Port Hedland, the world’s largest bulk exporting port, indicate the amount of iron ore that is leaving Australia for China (MCHI) and other destinations. This is an important supply-side indicator of the ongoing supply from major iron ore players such as BHP Billiton (BHP) (BLT), Fortescue Metals Group (FSUGY), and Atlas Iron, which ship from this port.
More than 80% of the shipments from this port go to China. Rio Tinto (RIO) ships iron ore out of Cape Lambert and Dampier. Because one of the major reasons for the weakness in iron ore prices is a supply glut, investors should watch for this indicator.
Export volumes at all-time high
Iron ore exports from Port Hedland totaled 38.4 million tons in June, compared with 38 million tons in May. This is a jump of 14.3% YoY (year-over-year) and 1.1% month-over-month. This is a monthly export record, as you can see in the above graph. For the first six months of the year, exports are up 13% YoY.
Exports to China from this port came in at a record 32.6 million tons. Some of the high-cost capacity closures in China have started showing in incremental volumes from overseas, particularly Australia.
Supply still expanding
Export volumes are accelerating due to supply additions from major iron ore players. Shipments are still expected to increase next year from this level as these supply additions come online. Strong volumes coupled with weak Chinese demand is putting negative pressure on the iron ore prices. This is negative for iron ore producers, including Vale SA (VALE) and Cliffs Natural Resources (CLF). CLF forms 2.9% of the SPDR S&P Metals and Mining ETF (XME).
In the next part of this series, we’ll see how iron ore exports from the second-biggest exporter are progressing.