Volume increases, healthy price growth and a weaker Australian Dollar mean the value of Port Hedland’s iron ore exports is at an all-time high, according Rail Express analysis.
After a serious slump over the prior year and a half, the price of iron ore has rebounded healthily in recent months.
The medium- and long-term prospects for the commodity remain uncertain.
But in February 2017, iron ore traded at an average of US$88.80 per metric tonne, up from US$80.82 in January 2017, and well-up from the price at the bottom of the trough: US$40.88 in December 2015.
US$88.80 a tonne is still down, of course, from the peak iron ore price around the start of 2014, when iron ore traded at an average of US$128.12 per tonne.
But this gap is less significant for Australian iron ore exporters, who have seen one Aussie Dollar drop from 88.6 US cents to 76.6 US cents in that same time frame.
What that drop means is a less significant gap between now and the peak for Australian exporters.
In Aussie Dollars, iron ore averaged $144.56 in January 2014, and $115.88 in February 2017.
That’s a difference of just 19.8%, compared to the 30.7% difference between the two US Dollar prices.
The iron ore price in Australian Dollars has diverged from the price in US Dollars, as the exchange rate between the two currencies has moved further away from parity in recent years. (Click to enlarge)
On top of stronger prices in recent months, volumes have increased dramatically out of Port Hedland in the same time frame.
Port Hedland is, for the most part, used by miners BHP Billiton, Fortescue Metals Group and Roy Hill, while fellow iron ore miner Rio Tinto uses the nearby Dampier Port.
Port Hedland averaged 34.5 million tonnes of iron ore exports each month in 2014.
That figure went up to around 37.4 million tonnes per month in 2015.
And in 2016 it climbed again, to 39.9 million tonnes per month.
40.3 million tonnes was exported in January 2017, and 35.7 million tonnes was loaded in February, with operations impacted by inclement weather.
When the volume growth and improved price is considered in Australian Dollar terms, the last three months have been the most valuable in terms of total iron ore exports at the port in quite some time.
The figures are obviously estimates based on the spot price, and don’t take contracts into account.
But based on the market value of the iron ore, December 2016’s iron ore exports out of Port Hedland were worth $4.75 billion, up from $2.12 billion in the same month a year earlier, and even up on the three-year record of $4.3 billion estimated for April 2014.
The December 2016 figure was also backed up by strong numbers in January ($4.38 billion) and February ($4.13 billion).
It’s anyone’s guess how long this purple patch will last, however.
A recent HSBC report predicted the price of iron ore may return to below US$40 a tonne this calendar year, before levelling to a long-term forecast of roughly US$52 a tonne.
The price will likely be subdued by slowing Chinese demand, along with a continued growth in supply.
In Australia alone, more Roy Hill capacity is set to come online, Rio Tinto has its 360mtpa growth project, and BHP Billiton has its own 290mtpa target.
Meanwhile, HSBC is reportedly expecting Chinese demand to drop 33 million tonnes in FY17 and a further 44 million tonnes in FY18.