The iron ore bubble BURST
I have been quite excited to write this month’s column – on the back of our West African feature it seemed a pertinent opportunity to talk about the surging iron ore price – a fantastic sign for the industry which has been suffering ultra-low prices for years now.
But, I have once again been reminded that even though the mining industry is no longer suffering the worst effects of a recession, the situation is still extremely volatile and no one can quite predict what the future has in store.
China largely dominates the demand for iron ore to produce steel – and its imports this year have been solid, and the iron ore price has comfortably reflected this.
We have seen prices pick up from US$40/t to in excess of $124/t in July. This peak lasted only a month sadly and at the time of writing this was hovering in the $80/t range.
Of course, in my excitement I nearly, not entirely but nearly, forgot about two massive contributing factors that were pushing the price up as well.
Vale’s iron ore tailings dam collapse in Brazil in January this year saw a massive cut in supply following the government’s decision to halt the operation while investigations into unsafe procedures commenced.
Factor in a tropical cyclone in Australia, and the rest of the world’s iron ore producers were benefiting.
Sadly, word on the analyst forecast street is that iron ore prices are unlikely to sit above $50/t in 2020. Production from the Vale mine is on the up and China’s steel demand doesn’t look particularly strong moving forward.
This iron ore bubble has quickly burst and we are reminded that the situation is a prime example of the direct impact that supply and demand has on commodity prices.
For companies such as Cape Lambert Resources, which has diverted its attention from copper/cobalt in the DRC back to iron ore in Sierra Leone, I wonder if this was a decision too quickly taken.
But, volatility and uncertainty are the name of this game, and perhaps forecasts are wrong. They have been in the past so I wait with baited breath to see if 2020 holds more promise than expected.
Delving deeper into tailings storage facilities
In light of the Vale tailings dam disaster – the second mass occurrence following SAMARCO in 2015 – the topic of safe management procedures for TSFs has again come under the spotlight.
The good news is that Mining Review Africa has some of the answers people have started asking in relation to this topic. Together with Knight Piésold (South Africa), we in August produced a Webinar titled: “Should upstream tailings storage facilities be banned?” which examined this sector of the mining industry in depth and answered some of industry’s biggest burning questions.
We had a bumper live audience attendance which alone is indicative of our market’s need to better understand how to manage their waste material.
But don’t worry, if you missed it you can listen to the recording by scanning the QR code to gain access to this gold mine of information.