MariTrace, 31 July 2023
As the sun rises on the second half of 2023, global inflation appears to be easing, though it may be too soon to predict when national economies can expect to experience real recovery from the long-run effects of the pandemic and war in Ukraine. Commodity movements are indicators for the recovery: among them, iron ore is critical for infrastructure development, particularly in Asia. Globally, the supply of iron ore was constrained in the first quarter of 2023 by adverse weather conditions in Brazil in January, elevated export tariffs in India and decreased exports from Ukraine during 2022. Australia – the world’s second largest supplier of seaborne iron ore after Brazil – supplied approximately 880 million tonnes in 2022, mostly to China. Transit times of approximately 12 days (compared with 45 from Brazil), make Australia an attractive supplier for importers of iron ore on China’s eastern coast. Illustrative of the importance of continuous stable supply, Australia’s iron ore was not among the commodities targeted by China’s trade restrictions that affected other sectors in the three years from 2020 to 2022.
Rio Tinto, an Anglo-Australian metals and mining company, is the world’s second-largest producer of iron ore, extracting and shipping five iron ore products from 16 mines in Western Australia. In March 2023 Rio Tinto’s share of iron ore shipments from Western Australia achieved a three-month high, largely due to a prolonged spell of dry weather inland. Iron ore shipments by Rio Tinto were approximately 163 million tonnes in H1 2023 (compared with 154.3 m tonnes in the same period for 2022), of which 71.3 m tonnes were shipped from the Port of Dampier (approximately a 10% YoY increase) and 91.8 m tonnes at Port Walcott.
Iron ore prices are expected to average around US$100 / tonne throughout 2023, due in part to subdued demand for steel and expectations around how rapidly China’s economy can recover to ‘business as usual’. Analysts seeking finer granularity in estimating prices (and understanding the factors that may threaten price stability) must navigate a host of other factors: in the case of iron ore, onshore logistics issues, weather conditions and incidents at mining operations, seaborne iron ore trade can also be affected by port maintenance issues and delays, adverse weather conditions in the major shipping lanes connecting Australia with Asia, availability of port operations staff and variations in the capesize index. China’s iron ore stockpiles typically decrease after March each year as construction work in China picks up again following the winter period: in February 2023 analysts anticipated that the rate and pace of new construction in China may increase through 2023, as China continues to recover from post-pandemic restrictions. Estimating these inventories and stockpiles requires accurate insight into actual iron ore shipment volumes: MariTrace clients and subscribers can access near real-time data for iron ore shipments - in some cases, well ahead of industry reports.
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