Brazil’s Crisis Stokes Iron Ore's Glow
Threats to supply from the pandemic are combining with China’s recovery to lift prices. Don't expect an early reversal.
This isn’t a healthy market.
Photographer: Dado Galdieri/Bloomberg
Brazil has just overtaken Russia to claim second spot in the global tally of coronavirus cases, behind only the U.S. The epidemic is threatening to disrupt supply in the world’s second-largest exporter of iron ore as China’s steel demand recovers, driving prices above $100 a metric ton for the first time since August. The scale of the unfolding health cataclysm suggests they won’t reverse soon, even if the rally looks unsustainable.
Last year was unusually dramatic for iron ore. A fatal dam collapse took out almost a quarter of Brazilian miner Vale SA’s original 2019 target of 400 million tons. Weeks later, a tropical cyclone in Australia dented global output further. The supply impact then was immediate and clear, and prices responded accordingly. This year’s surge has been almost as much about fear of disruption as about current supply, as an outbreak at Vale’s Itabira complex showed last week. Vale said it obtained an injunction to continue work at the operation after prosecutors sought to temporarily shut down activities for coronavirus testing.