| Fortescue Metals Group's Iron Bridge iron ore project in Western Australia, which started production of high-grade magnetite concentrate during the second quarter. |
Iron ore output from 20 of the world's top producers rose year over year despite prices falling 21% over the same period, as optimism about China's economic recovery faded.
The analyzed companies' production increased by 6.5 million metric tons, or 1.9%, year over year. The NYMEX 62% iron ore price averaged $111.83 per metric ton in the second quarter, compared with $142.17/t a year earlier, according to S&P Global Market Intelligence data.
Australia's Champion Iron Ltd. had the sharpest rise of the group analyzed at 48.8%, albeit coming from a low base. Production from Brazil's Companhia Siderúrgica Nacional rose 34.7%. Switzerland-based Ferrexpo PLC and India's Godawari Power & Ispat Ltd. had the biggest output declines year over year at 44.3% and 23.1%, respectively.
China's Zijin Mining Group Co. Ltd. saw the biggest quarter-over-quarter percentage lift in production, jumping 197.6% to 951,000 metric tons. India's Vedanta Ltd. had the largest quarter-over-quarter percentage decrease, falling 25% to 1.2 MMt.
Top 5 miners
Fortescue Metals Group Ltd. was the only iron ore miner in the top five whose April-June output fell year over year, dropping 6.5 MMt, or 11%, to 52.7 MMt. Its production slipped despite record full-year shipments for fiscal 2023 and the startup of its Iron Bridge mine in Western Australia.
Among the top five miners, production from Brazil's Vale SA, Anglo-Australian miner Rio Tinto Group, Australia's BHP Group Ltd. and Japan's Mitsui & Co. Ltd. all rose year over year.
Vale experienced the largest increase in actual tonnage year over year, rising 4.6 MMt to 78.7 MMt, while Fortescue had the biggest decline in tonnage. ArcelorMittal SA's production fell 1.5 MMt, or 12.5%, to 10.5 MMt.
Bearish near-term outlook
China's iron ore imports rose 40.7 MMt in January-June compared with the first half of 2022, despite subdued second-quarter steel demand due to property and manufacturing sector weakness, according to S&P Global Commodity Insights analysis.
The Chinese central bank's move to protect banks' margins sent iron ore prices to a four-week high of $113/t on Aug. 22. Prices then surged in the week ending Sept. 1 as China cut down payments for first-time homebuyers to 20% and for second-time buyers to 30%. Banks including Industrial and Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. then cut deposit rates Sept. 1.
Commonwealth Bank of Australia sees the potential stabilization in China's manufacturing sector and overall construction activity as "rare green shoots in China's commodity-intensive economy in recent months," the bank said in a Sept. 4 note, pointing to both China's Purchasing Managers' Index and the Caixin S&P Global survey measure rising in August.
"While infrastructure spending would be the most effective way to boost China's commodity demand in H2 2023, it faces its own hurdles, particularly with local government debts so elevated," the bank said.
Citi Research is staying cautious on industrial metals over the next six to nine months and leaning "towards fading the recent iron ore rally," analyst Wenyu Yao said in an Aug. 24 note. "The latest macro indicators suggest that the economic slowdown has not shown signs of reversing," and policymakers appear "behind the curve" on policy support measures "without undertaking effective actions," Yao wrote.
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