Brazil’s deadly coronavirus outbreak has disrupted global supplies of iron ore just as demand from China is revving up, pushing the price of the steel ingredient to a seven-month high.
Iron ore is one of the most heavily traded commodities and can influence the price of materials used in everything from buildings to cars. Front-month futures for ore with 62% iron content jumped 10 per cent to nearly $107 a tonne on China’s Dalian Commodity Exchange. That is their highest closing price since October 2019.
Prices have risen 20 per cent since early April, driven by squeezed supplies from Brazil, which dominates the iron-ore mining industry along with Australia. The rally is also an indication that China’s economy is gathering momentum, after a downturn at the start of the year when swaths of the country went into lockdown to stop the coronavirus spreading.
Iron-ore shipments from Brazil have fallen by almost a quarter in May because of the country’s coronavirus crisis, which is one of the worst in the world. Brazil exported 15.27 million tonnes of iron ore in the first three weeks of May. That is down from 19.4 million tonnes in the comparable period of 2019, when exports were already lower than normal following the fatal dam collapse at Vale SA’s mine in Brumadinho.
Vale has said the coronavirus will reduce the amount of iron it is able to produce this year. The company said in late April it will mine between 345 million and 370 million tonnes of iron-ore powder and pellets in 2020, around 40 million tonnes less that it previously expected. Brazil as a whole mined 480 million tonnes of iron ore in 2019, according to the U.S. Geological Survey, a fifth of global production and second only to Australia. The squeeze on supplies has struck at the same time as demand for the raw material from China’s steel sector is picking up. Steel mills in China produced 85 million tonnes of crude steel in April, according to the National Bureau of Statistics, almost 8% higher than the 79 million tonnes made in March.