Australian Iron Exports Climb to Record as China Prices Drop

  • Surge in cargoes offers further sign of robust low-cost supply
  • Prices may come under pressure in October, Maike’s Dang says

Iron ore shipments from the world’s largest bulk-export terminal in Australia swelled to a record, offering fresh evidence of strong supply and underpinning forecasts of lower prices through the year-end. Futures in China slumped to the lowest in more than two months.

Exports from Port Hedland totaled 42.9 million metric tons in August from 38.7 million in July and 39.2 million a year earlier, data from the Pilbara Ports Authority showed Wednesday. Cargoes to China were 35.4 million tons, also an all-time high, from 32.5 million in July and 33.9 million in August 2015.

The surge adds to signs of robust low-cost supply that Citigroup Inc. and Morgan Stanley have predicted will increase through the end of 2016, hurting prices that have soared 34 percent this year. Even miner BHP Billiton Ltd. said this month it expects iron ore to begin retreating as the under-performance of supply in the first half is expected to reverse over the next 12 to 18 months.

“The data show that supply-side pressure is definitely building,” Dang Man, an analyst at Maike Futures Co. in Xi’an, said by phone. “While the price decline may not be immediate as September is typically a strong period for Chinese demand, come October, we’ll begin to see iron ore coming under pressure.”

Ore with 62 percent content delivered to Qingdao fell 1.2 percent to $58.46 a dry ton Wednesday, according to Metal Bulletin Ltd. The metal has traded at about $60 over the past month after three annual declines. Futures on China’s Dalian Commodity Exchange lost 3.9 percent to 407.5 yuan ($61) a ton on Wednesday, the lowest close since June 24.

Port Hedland is a maritime gateway for low-cost supply from Australia’s Pilbara region and handles cargoes from miners including BHP, Fortescue Metals Group Ltd. and Gina Rinehart’s Roy Hill, which is ramping up output this year. Production from miners remains strong and there had been signs of inventories building across ports in China, according to Citigroup.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE