Rio Tinto is on track to become the world’s biggest iron ore exporter in 2019 after trouble-prone Brazilian miner Vale revealed weaker-than-expected exports over the past three months.

The surprisingly weak performance from Vale came as African iron ore miner Kumba joined the industry trend for reduced export targets, and as Vale reiterated that it could be three years before it resumed shipping at full speed.

Vale was always expected to ship less iron ore this year after the catastrophic dam failures in January that killed hundreds of people and forced the company to halt about 90 million tonnes of annual production capacity.

But even allowing for the dam disruptions, Vale’s iron ore production in the three months ended June 30 was about 14 per cent below analysts’ expectations.

The fall to producing just 64.05 million tonnes over the past three months was blamed on rain, and Vale shipped 61.9 million tonnes in the quarter.

Vale exported 138.5 million tonnes in the first half of 2019, 18 per cent less than in the same period of last year.

The company expects exports to rise over the next six months with the help of the recent restart of the Brucutu mine, and the company forecast exports in 2019 would fall around the midpoint of its 307 million to 332 million tonne guidance range.

The midpoint of that guidance is 319.5 million tonnes, lower than Rio’s forecast of shipping between 320 million and 330 million tonnes in 2019.

If Rio can sell more than Vale, it would be the first time that has happened in recent memory.

Ironically, the title of biggest exporter could pass to Rio in the year that Rio posts its first fall in annual iron ore exports this century.

Vale sold 365.5 million tonnes of iron ore products, including pellets, in 2018, easily eclipsing the 338 million tonnes sold by Rio from the pilbara.

If Rio’s Canadian iron ore sales were included, the miner sold 353.2 million tonnes in 2018.

With Rio and Vale both almost certain to ship less iron ore than they did last year, 2019 is on track to be a very weak year for iron ore supply.

BHP, the world’s third biggest producer, confirmed last week that its exports in the year to June 30 were lower than the previous year; the first time the miner has reported a sequential fall in exports since the turn of the century.

Some analysts believe Fortescue will report the first decline in annual exports in the company’s history later this week.

Those four companies are the four biggest suppliers of the steel ingredient to China, and their weak performance has combined with stronger than expected steel demand to send iron ore prices to five year highs.

Iron ore was fetching $US119.50 in the past week.

But the big four are not alone; Anglo American subsidiary Kumba confirmed in recent days that it would also reduce its production guidance.

Kumba was supposed to produce between 43 million and 44 million tonnes in 2019, but said it would ship between 42 million and 43 million.

The exception to the rule has been Gina Rinehart’s Roy Hill operation, which shipped more iron ore in the year to June 30 than in the previous year.

The supply disruptions from the dam disaster has altered the amount of iron ore Vale produces in different parts of Brazil, and has duly played havoc with its shipping schedules.

Inefficiencies at the port sparked a sharp rise in unit costs, with ships waiting an average of 32 days at the Sao Luis port in the month of May, up from an average of four days in January.

The biggest question facing iron ore markets is the pace at which Vale resumes production at the mines that were shut in the wake of this year’s dam disaster.

The restart of Brucutu means Vale still has about 60 million tonnes of annual capacity shuttered.

The company indicated about half of that 60 million tonnes would resume within the next year, while the other half could be years away from resumption.

”Vale expects that 30 million tonnes per year of dry processing production will be gradually resumed starting by the end of this year and the remaining 30 million tonnes per year, which includes wet processing is estimated to return in about two to three years,” said Vale on Tuesday morning Australian time.

The notion of restarting wet processing is controversial, because such processing requires tailings dams of the sort that have collapsed in Brazil this year and in 2015 when BHP and Vale’s Samarco operation was the scene of a tragic dam collapse which killed 19 people and destroyed several towns.

Fonte: Financial Review