The June quarter operational performance from the world’s top iron ore miners is in line with Kpler Insight’s forecasts. The difference between Kpler Insight projections and the actual shipments or production by Rio Tinto, BHP and FMG are all within 1%.

Rio Tinto: Doing well in Australia but not in Guinea?

Rio Tinto officially reported 80.30 Mt of Pilbara shipments for the second quarter of 2024 (+1.52% y/y), slightly above Kpler Insight’s forecast of 79.80 Mt based on shipping data. As expected, the miner emphasised the impacts on production from a train derailment in mid-May, citing that the incident resulted in six days of lost rail capacity and full stockpiles at some mines.

With the addition of the reported 77.90 Mt for the first quarter of the year, Rio Tinto’s shipments totalled 158.20 Mt, leaving 164.80 - 179.80 Mt to be shipped to meet the annual guidance of 323 - 338 Mt. We believe the miner will easily achieve the lower end of the annual guidance given it often increases shipments in the second half of a calendar year. However, reaching the midpoint of the guidance will take extra effort, especially when the Chinese demand outlook is softening.

In the same quarterly operations report, Rio Tinto declared that “all conditions were satisfied for investment to develop the Simandou high-grade iron ore deposit in Guinea”. However, hours after the declaration, in Moribadou, violence organized by local youth protesting the recruitment processes of subcontractors working on the Simandou project led to at least one death, several injuries, and the damage of dozens of vehicles and equipment. This follows violence targeting the Winning Consortium Simandou camp in Maferinya in early May. These incidents indicate that the development of the Simandou iron ore project will not be a smooth ride, although a lot of progress has already been made.

Vale is set to touch the upper end of annual guidance

Thanks to record second-quarter output at the S11D project and increased sales, Vale reported 80.60 Mt of production in the three months from April to June, up from 78.74 Mt a year earlier. This compares to Kpler Insight’s prediction of 78 Mt.The 3.60 Mt discrepancy may reflect a rebuilding of inventories in Brazil after exceptionally strong shipments in 1q24.

Adding the reported 70.80 Mt for the first three months of 2024, Vale has achieved 151.40 Mt of iron ore production in the first of the year, leaving 158.60 – 168.60 Mt to be produced to meet the annual target of 310-320 Mt. We maintain our estimate that Vale may reach at least 170 Mt in the second half of the year, potentially elevating the total 2024 annual production close to or beyond the upper limit of its 310-320 Mt guidance.

Vale’s Carajás Railroad has reportedly been blocked by indigenous groups since 25 July, similar to something already seen in 2022 and 2012. The railway connects Vale’s Northern System mining operations and the port of Sao Luis, which accounts for nearly 60% of Vale’s iron ore exports from Brazil. We do not expect the blockade will have a significant impact on Vale’s iron ore shipments as port inventories are considered relatively sufficient, although some delays may happen if the blockade is prolonged.

BHP keeps FY2025 output guidance flat y/y

In the last quarter of its FY2024 ending June, BHP produced 76.80 Mt of iron ore in Western Australia (100% basis), reflecting a significant 5.64% y/y growth and slightly higher than Kpler Insight’s prediction of 76.10 Mt. The miner attributed the strong performance to increased capacity unlocked by the Port Debottlenecking Project 1 (PDP1) and record production at South Flank, which reached full capacity in the last quarter of FY2024, three years after the delivery of the first ore.

This strong June quarter figure also marks a fresh record high in quarterly output, bringing the whole FY2024 production to an all-time high of 287 Mt. However, for FY2025, BHP has adopted a cautious approach by keeping the whole year guidance unchanged from FY2024’s 284-294 Mt (WAIO 100% basis). The miner ascribes the cautiousness to more planned tie-in activities for the Rail Technology Programme 1 (RTP1) but we believe concerns over Chinese demand may have also been taken into account.

FMG misses annual guidance, the first time in five years

Close to Kpler Insight’s projection of 54.20 Mt, FMG posted 53.70 Mt of iron ore shipments in the fourth quarter of its FY2024 ending June, marking the strongest-ever quarterly performance and representing a substantial 9.82% y/y growth. Including the reported 137.90 Mt of shipments for the previous three quarters, FMG managed total shipments of 191.60 Mt, slightly missing the annual guidance of 192-197 Mt. The underperformance of its new flagship project Iron Bridge, a derailment accident and weather disruptions in the previous quarters collectively led to the first guidance missing in five years. The miner at first expected 2-4 Mt of shipments from Iron Bridge in FY2024 and cut it to around 2 Mt in April. However, it turned out that the new project, which achieved first shipments in July 2023, only managed shipments of 1.20 Mt in the whole fiscal year.

For FY2025, FMG has set a shipment target of 190-200 Mt, adding that 5-9 Mt will be from Iron Bridge (100% basis). We believe that the widened guidance reflects continued uncertainties over the Iron Bridge project. In addition, facing increasing mining costs and decreasing iron ore prices, FMG announced in mid-July it would be cutting 700 jobs, or 4.5% of its global workforce, highlighting more profit margin pressure compared to other mining giants with more diversified assets or higher grade deposits.

Outlook – China remains a big uncertainty

Strong output by major iron ore miners pushed global seaborne shipments to a new second-quarter high, raising fresh concerns about oversupply and weighing on prices. Most of the increased supplies are destined for China as combined demand by the rest of the world is expected to be flat or only rise modestly.

While China’s iron ore imports jumped by 5.62% y/y to 310 Mt in the June quarter, its crude steel production dropped by 1.47% y/y, extending the 0.37% decline witnessed in the first quarter. Excessive supplies continued to translate into stockpiles. However, with inventories expected to reach record levels in the coming weeks, there is uncertainty as to whether China is able to absorb more iron ore. The potential building of strategic iron ore reserves (maybe already secretly underway) could allow the country to continue to have an increasing appetite for the steelmaking raw material but otherwise, there is no clear reason that imports will grow further.

On the supply side, major iron ore miners still have the capacity to gradually and modestly increase output for the rest of the year. Both FMG’s Iron Bridge (22 Mtpa), MinRes’ Onslow project (35 Mt) and Vale’s S11D (120 Mtpa) are all currently ramping up production and are expected to reach nameplate capacity in 2025 and 2026.

The supply-demand dynamics in the coming months continue to support our view that iron ore prices will trend lower through the remainder of the year.
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