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How Are Iron Ore Shipments Impacting Prices?

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Nov. 28 2016, Updated 8:04 a.m. ET

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 see how shipments are shaping up for October and how they’re expected to pan out going forward.

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Strong iron ore shipments

In October, Port Hedland iron ore exports were 41.6 million tons, a rise of 14% year-over-year. On a year-to-date basis, the shipments surged to 469 million, up 6% from the same period last year. According to The Australian, UBS stated that “’The sequential decrease [was] reflecting a soft month for BHP and a pull back from high levels for FMG,’ adding that Rio Tinto’s shipments still rose in the month.”

Major iron ore players such as BHP Billiton (BHP) (BBL), Fortescue Metals (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, also started shipping iron ore in December 2015.

According to the Brazilian Ministry, the exports of iron ore from Brazil totaled 30 million tons, a decline of 15% month-over-month and 12% year-over-year.

Low-cost supply to pressure prices

Australia and Brazil are typically the lowest-cost iron ore producers. Rising exports from these destinations point to a robust low-cost supply. It’s worth noting that this rise doesn’t include ore from S11D, Vale’s (VALE) iron ore project, which is expected to hit the market in 2017. These low-cost supplies and the additional ore surely can’t bode well for iron ore prices going forward. Next, we’ll look at the iron ore inventory situation at Chinese ports.

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