Brazil’s iron ore exports ticked up in May, but overall shipments remain behind 2021 levels largely due to a disruptive start to the year caused by heavy rains and

logistical challenges within Brazil. Whereas SH 2021 saw a bounce in global steel production, economic conditions have since deteriorated so there is no guarantee that demand for iron ore will push exports to the same Q3 levels as seen for the past three years.

One negative factor is the iron ore price which has effectively halved since May of last year; though the current CIF price for 62Fe at $124 per tonne is up from the years low $109 of two weeks ago, there is little optimism that prices will rebound to the year’s high $160 in early March as analysts pondered how the annual 45 MMT iron ore exports from Ukraine would be replaced.

With Brazil heavily reliant on China for nearly two thirds of its export market, there are few signs of a sustained economic stimulus from the Chinese government that might accelerate steel production. Investment in infrastructure in China remains weak whilst domestic property newbuilds have contracted nearly 17% y-o-y in the first five months 2022. Though Chinese steel production rose 4.1% in May compared to April, steel mills are facing falling profit margins and rising inventories (stockpiles at major mills were up to 20.5 MMT, +30% y-o-y by mid-June) and it was no surprise that steel exports in May at 8.1 MMT hit a five-year high.

With Brazilian iron ore exports perhaps only reaching 150 MMT for the first six months of 2022, last year’s total exports of 357 MMT seem a long way off, with the current premiums on Q3 and Q4 Capesize FFA’s perhaps predicated on Brazil substantially increasing exports to at least 200 MMT in SH 2022 with the additional tonne-mile demand that this might potentially provide. At present this appears an optimistic forecast!