Iron ore soared 81 percent in 2016 in a year when low-cost supply had been expected to rise further amid tepid consumption, hurting prices. Instead, stimulus in China helped sustain steel output, and that, along with speculative interest and record coal prices, fueled the rally. Better demand and a more restrained approach by top miners Rio Tinto Group and Vale are likely to carry into this year, limiting losses, according to Clarksons Platou Securities Inc.
Prices should remain around $70 to $80 in the early part of 2017, with a gradual easing toward the $50-to-$60 range by mid-year, according to Gavin Wendt, founding director and senior resource analyst at MineLife Pty. The drop would come as supply better balances with demand, Wendt said in an e-mail.
The $14 billion S11D mine, with first shipments set for this month, will produce 90 million tons a year at full capacity. In the run-up to the opening, Vale executives have stressed the four-year period it’ll take to reach maximum output, and that the net gain to company production will be less than 90 million tons because of infrastructure constraints.
Even before S11D gets into its stride, exports from Brazil are running at a record pace. Total shipments in 2016 were about 374 million tons, topping the previous annual high of 366 million tons in 2015, according to Bloomberg calculations based on data from the Trade Ministry.
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