Port Hedland’s exports
The bulk of the world’s seaborne iron ore exports come from Australia. According to customs data, Australia supplied 59% of China’s iron ore imports in 2014. In 2013, that figure was 51%.
It’s important for dry bulk investors to track the exports from Port Hedland because it’s the world’s largest bulk exporting port. More than 80% of the shipments from this port go to China. BHP Billiton (BHP) (BLT) and Fortescue Metals Group (FSUGY) both ship from Port Hedland. Meanwhile, Rio Tinto (RIO) exports its iron ore from Cape Lambert and Dampier. They’re located west of Port Hedland.
Exports fall after record volumes
Iron ore exports from Port Hedland totaled 35.3 million tons in July—compared to a record 38.4 million tons in June. It’s a fall of 2.20% YoY (year-over-year) and 8% month-over-month. These are the lowest monthly shipments since November 2014. Exports to China also fell to 29.5 million tons. This was a fall of 9.50% month-over-month.
The reason for the fall seems to be the scheduled maintenance at some terminals in Australia. Goldman Sachs had previously pointed to weaker shipments in July due to maintenance activities.
Impact on dry bulkers
Since this fall in shipments is most likely a one-off thing, it shouldn’t impact dry bulkers negatively. In fact, iron ore giants’ production plans like Rio Tinto and BHP Billiton are intact for 2015. Gina Rinehart’s $10 billion Roy Hill project is also on schedule to come online later this year. The project’s full production capacity is estimated to be 55 million tons per year once it ramps up fully.
This should lead to increased shipments from Australia later in the year or early 2016. These shipments will find their way to China and elsewhere through dry bulk shippers including Star Bulk Carriers (SBLK), Safe Bulkers (SB), Navios Maritime Holdings (NM), and Navios Maritime Partners (NMM).
Navios Holdings forms 2.20% of the Guggenheim Shipping ETF (SEA).
For broad exposure to this sector, you can consider the SPDR S&P Metals and Mining ETF (XME). XME invests in industries like steel, coal and consumable fuels, gold, precious metals and minerals, aluminum, and diversified metals and mining.
Brazil is another major iron ore exporter. We’ll look at the progression of exports from Brazil in the next part of this series.