Iron ore prices are heating up on a shortfall in Brazilian exports due to the pandemic. With negative rhetoric surrounding Australia's trade relationship with China, what is the outlook for Australia's iron ore miners?
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?
Government action in South Africa has led to Rio Tinto shutting down operations and developments there for three weeks. Quebec has called mining and smelting essential, but only at minimum rates. The broker has adjusted accordingly and also adjusted for commodity price and forex movements.
Citi estimates global growth will be modestly higher in 2020, which is bullish for commodities. The broker is positive about hard coking coal in the first quarter of 2020, expecting the price to average US$170/t over the year.
Macquarie has tweaked its iron ore shipment expectations for Rio Tinto, lifting 2019 slightly but reducing 2020 slightly on a slower ramp-up at Koodaideri. The completion of Rio's new iron ore developments should reduce costs in the medium term, the broker suggests, but for now expected costs rise 10%.