Iron Ore Prices Could Be Supported after Vale’s Mine Restart



Iron ore prices fall

Iron ore prices took a major step up after supply disruptions from Vale (VALE) became evident. Read Is the Party Just Getting Started for Iron ore Miners? to learn more. There were minor disruptions from BHP Billiton (BHP) and Rio Tinto (RIO), which supported the prices. However, one of the major disruptions for Vale ended. On April 16, a Brazilian (EWZ) court gave Vale authorization to restart its operations at the Brucutu mine. As a result, iron ore prices fell. For the week ending April 18, iron ore prices recorded the worst fall in the last 20 weeks.

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Sentiment-driven fall

However, most of the fall in iron ore prices was sentiment driven. Even though a Brazilian court gave Vale authorization to restart the Brucutu mine, Vale hasn’t increased its guidance. Heavier-than-expected rainfall disrupted Vale’s supply in the Northern System.

Factors supporting iron ore prices

The next major and sustainable support for iron ore prices could come from Chinese (FXI) demand. The recent data out of China have been better than expected. The demand from the manufacturing and construction sectors is also strong.

Another factor that could support iron ore prices, at least in the short term, is Chinese steel mills restocking. The mills’ inventories are running low after a prolonged period of iron ore strength.

The above-mentioned factors could keep iron ore prices supported, which would help miners (XME) including Cleveland Cliffs (CLF), BHP, RIO, and Fortescue Metals Group (FSUGY).


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