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Will Vale Keep Iron Ore Shipments Strong in 2017?

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Jan. 30 2017, Updated 7:35 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 December 2016 and the year as a whole. We’ll also see how they’re expected to pan out going forward in 2017.

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Record iron ore shipments

In December 2016, 43.9 million tons of iron ore were exported from Port Hedland. This amount was an impressive rise of 17.0% year-over-year (or YoY) compared to November’s 41.2 million tons. Total shipments in the last 12 months were a record 478.9 million tons, an annual rise of 7.4%.

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, started shipping iron ore in December 2015.

Iron ore exports from Brazil, on the other hand, shrank 11.0% YoY to 35.1 million tons, implying a rise of 12.0% month-over-month.

More 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. Investors should note that Vale (VALE) has started to ship volumes from its S11D project, which should boost export volumes. Vale had already loaded 27,000 tons of iron ore as of January 20, 2017. Low-cost supplies and additional ore surely don’t bode well for iron ore prices going forward.

In the next article, let’s look at the iron ore inventory situation at Chinese ports.

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