Iron Ore's Towering Rally Set to Roll Into 2021 as Mills Protest
Comment of the Day

December 16 2020

Commentary by Eoin Treacy

Iron Ore's Towering Rally Set to Roll Into 2021 as Mills Protest

This article by Krystal Chia and James Attwood for Bloomberg may be of interest to subscribers. Here is a section:

Once the biggest iron ore miner in the world, Brazil’s Vale SA fell back to second spot last year after the devastating tailings dam collapse that killed about 270 people and triggered an overhaul of its waste storage facilities.

Vale is still about 100 million tons short of meeting the 400 million tons in output promised prior to the Brumadinho dam disaster. The recovery has been slower than expected, depriving the market of much-needed ore. Like its Australian rivals -- Rio Tinto Group, BHP Group and Fortescue Metals Group Ltd. -- Vale has prioritized value over volume. With current prices above $150 a ton and mining costs as low as $12 a ton, it’s an approach that has reaped rich rewards.

Eoin Treacy's view

BHP, Rio Tinto and Vale control the vast majority of the iron-ore market. They were very disciplined in refusing to raise production volumes for at least the first half of the commodity bull market. That supply inelasticity was the driver of a significant bull market and only came to a close when high price encouraged competitors into the market. Since then, many of the upstarts have gone bust. Supply might not be as concentrated as it was in the early 2000s but these companies still hold a lot of sway.

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