So what will BHP, Rio Tinto and Fortescue Metals do now that their Brazilian iron ore rival, Vale, has raised the possibility of curbing or suspending iron ore shipments because of the growing threat of the COVID-19 virus?
Certainly Vale’s surprise warning could very well boost global iron ore prices starting today. Iron ore was the only major globally traded commodity whose price rose in last week’s share, bond and commodity sell-off.
The price for 62% Fe fines delivered to northern China rose 96 cents on Friday to $US91.91 a tonne, according to the Metal Bulletin. That’s up 1.6% from the previous week’s close of $US90.19 a tonne.
Iron ore prices have been held up by supply constraints from brazil due to heavy rain and transport hitches, and from Rio’s lower than expected output from its Pilbara mines because of the damage caused by Cyclone Damien in February.
News that supplies from Brazil might be further constrained is likely to see Chinese steel mills and traders chase iron ore higher this week.
The three big Australian iron ore companies have not issued a statement about the impact of the COVID-19 virus on their mining operations, especially iron ore.
So far its presence in the iron ore province in the Pilbara has been weak to non-existent and only a handful of cases have been reported elsewhere in WA.
BHP shares rose 1.5% in Friday’s late rebound but are still down 31.3% for the year, Rio shares jumped 4.75% but are still off 19.2% while Fortescue shares surged 135 on Friday which trimmed the losses to just 7.1%.
This is in contrast to Brazil where the President and some senior officials and others have been infected.
That seems to have drawn the Friday statement from Vale (http://www.vale.com/brasil/EN/investors/information-market/press-releases/Pages/Vale-informs-on-developments-related-to-the-outbreak-of-the-coronavirus.aspx)
Vale has said it may have to implement contingency measures or eventually suspend operations due to the global spread of the coronavirus pandemic.
The miner made it clear, however, that “as of today, we have not suffered any material impact to our operations, logistics, sales or financial position, nor [have] any of our employees tested positive for coronavirus.”
“As the outbreak develops [in] the regions where our operations are concentrated, we may face workforce-related operational difficulties and may need to adopt contingency measures or eventually suspend operations,” the miner said in its statement.
Vale said it had made the announcement because a significant proportion of its revenues come from sales to customers in Asia (63% in 2019) and Europe (13.8%) where the virus is at its greatest and it therefore has to rely on an extensive logistics and supply chains, including ports, distribution centres and suppliers in regions affected by the pandemic.