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Iron Ore Exports Grow Unabated

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Updated

Iron ore shipments

Iron ore shipments from the major Australian and Brazilian (EWZ) ports represent the lion’s share of the overall iron ore exports. These shipments represent a large portion of the supply for iron ore, making it important for investors to track this data.

Port Hedland is the largest iron ore loading port in Australia. BHP Billiton (BHP), Hancock Prospecting, and Fortescue Metals Group (FSUGY) use this port. Rio Tinto (RIO), on the other hand, uses Port Dampier.

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The iron ore exports from Port Hedland saw a rise of 3.7% year-over-year (or YoY) in September to 43.4 million tons. September also saw a 1.4% sequential rise in shipments. Most of the rise in shipments is likely due to more exports to China, which increased from 35.7 million tons in August to 36.7 million tons in September.

While iron ore exports from Brazil increased 13.2% YoY in value terms in September to ~$1.6 billion, they were lower with respect to volume. The country exported 31.9 million tons of iron ore, 9.6% lower YoY and 6.4% lower sequentially.

China was Brazil’s top importer. Brazil exported 16.3 million tons of iron ore to China during the month. While September’s data showed a slight decline, overall, iron ore exports from Brazil are inching higher as Vale’s (VALE) largest iron ore project, S11D, is ramping up.

More supply going forward

While there may be occasional down months, as a trend, iron ore exports from Australia and Brazil have been inching higher. The major miners in these countries put up additional capacity to satiate China’s demand at the peak of the cycle.

Secondly, these miners have high-quality ore with higher Fe (iron ore content), which is now valued more by China due to its fight against pollution. The supply from these countries is expected to grow in the coming few years. Some of this supply has also led to a fall in iron ore prices.

While China’s steel cuts could limit the demand for iron ore, the supply remains plentiful. The ramp-up of Vale’s 90 million ton–per–year S11D project is going according to schedule with a full ramp-up expected over the next couple of years. Gina Rinehart’s Roy Hill project in Australia is also ramping up toward its full capacity of 55 million tons per year.

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