Australian Storms and Brazilian Production Slump Drive Up Chinese Iron Ore Prices by 10%

Brazilian firm Vale, the world’s second-largest iron pore producer, has reduced its production forecasts for next year after a fall in output. Meanwhile tropical storms have hit the west of Australia, a country which accounts for 58 per cent of ore exports by sea, just as steel demand rises in China.

Production slumps in Brazil and tropical storms hitting Australia have caused an iron ore shortage that has driven up prices in China by 10 per cent at a time of surging steel demand.

Senior analyst Erik Hedborg at commodity firm CRU told CNBC that China’s strong economy and heavy investment in infrastructure projects had led to greater demand for steel, just as production from Brazilian mines had fallen and a series of storms hit western Australia. The two countries account for 82 per cent of seaborne iron ore exports in 2019, according to the World Steel Association.

Ore exports from Brazil hit a six-month low in November, while Brazilian firm Vale, the world’s second-largest producer, cut its supply forecasts.

The analyst predicted that strong demand for steel in construction and infrastructure projects was likely to continue, which coupled with a long-term downturn in production would keep prices high.

He stressed that cyclones are common in the first quarter of the year, adding: “This right now is a sign that we could see a pretty problematic cyclone season in Australia.” 



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