Who can fill Vale’s supply gap?

India’s iron ore pellet exports are expected to increase as importers seek alternative sources due to Vale’s production cuts following January’s disaster at Brumadinho. According to India Ratings and Research Ltd, the Asian country’s exports may rise by up to 20% in 2019 from 9m ton in 2018.

DataLiner shows Vale’s top iron ore concentrates (HS 2601) destinations for the last 10 years:

Some of the top destinations e.g. China, Japan, and South Korea, will now source pellets from India, according to India Ratings and Research Ltd. India’s pellet exports rose 1,200% over two years to 9.3m tons in the year ended March 2018, mainly as a result of Chinese buying.

Vale’s absence in the iron ore market will also shift dynamics inside Brazil, especially for companies that sell run-of-mine ore to Vale. A Brazilian junior, Centaurus Metals, is currently sitting on a JORC (Joint Ore Reserves Committee) resource of 128m tons and an initial ore reserve of 48.5m tons, at its fully-permitted Jambreiro project in Minas Gerais. According to Centaurus, the reserve is “ideally positioned” to supply high-quality iron ore to domestic steel mills. With iron ore prices heading towards US$100 a ton, odds are in favor of Centaurus, for now.

According to Secex data, Brazil’s average daily shipments of iron ore rose by 7.8% to 1.4m tons per business day for the month to February 22, year-on-year. This is a total of 22.8m tons over 16 business days, despite Vale SA halting several of its operations following January’s disaster at Brumadinho.

Sharing is caring!