Australia and Brazil to increase control of global iron ore supply

Australia and Brazil are set to supply 90 per cent of all seaborne iron ore by 2020.

That’s the prediction from Macquarie Bank which said the two iron ore producing powerhouses would increase their joint share from 73 per cent in 2013 to 79 per cent in 2015, reported.

For Brazil, the biggest player is Vale, which has plans to up its output by 450 million tonnes of iron ore a year by 2015.

Last year the miner produced 306 million tonnes.

The company has signed up to build an extra 14 of its massive Valemax ship to help haul the ore, with China lifting a ban which restricted the vessel entering the country’s ports.

Valemax are very large or carriers (VLOC) have capacities ranging from 380 000 to 400 000 short tons deadweight, and are the largest bulk carriers ever built, with draughts of between 22 and 32 metres.

The full Valemax fleet would be able to haul about 44 million tonnes a year to China and means Vale can make up some lost ground in its rivalry with Australian miners who have shorter and cheaper runs to Chinese ports.

But the Australian miners are also looking for a leg-up, and the two biggest, Rio Tinto and BHP Billiton are undertaking expansion plans which will keep them in the top spots.

Rio will be producing 360 million tonnes of iron ore a year by the middle of 2015.

Meanwhile, BHP has said it plans to add 65 million tonnes to its operations.

This would increase annual output to 275 million tonnes per annum by the 2017.

Other major players are also helping to keep the flow of ore out of Australia steady, and rising.

Fortescue Metals Group currently produced around 155 million tonnes a year.

And once Gina Rinehart’s Roy Hill project gets to full production, a further 55 million tonnes a year will head out to sea.

But not all are happy about the new wave of supply, and analysts have blamed the increases on the iron ore price slide this year which has seen a 40 per cent drop in the commodity’s value.

Some say it could get even worse.

Ian Roper, a Singapore-based analyst said the new supply won’t be absorbed by China and will lead to an iron ore price of around $US75 a tonne by the back end of 2015.

There is still wiggle room at these prices if you’re Rio Tinto though, which produces its ore for $US20.40 per tonne.

BHP has also flagged its intention to bring costs per unit down to similar levels.

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