[Ferro-Alloys.com] Miner Rio Tinto has trimmed its 2020 iron ore shipments guidance from the Pilbara area of Western Australia by between 6 million mt and 9 million mt, or around 2%, due to infrastructure damage and shipping restrictions caused by the recent passage of tropical cyclone Damien.
Seaborne iron ore prices are likely to be supported by the news, analysts said Monday, especially after Brazilian miner Vale also announced reduced first-quarter shipment expectations last week, as a result of heavy rainfall in Brazil. However, the lower shipments could still hit Rio Tinto's annual EBITDA expectations, they warned.
Rio Tinto's Pilbara shipments in 2020 are now expected to be between 324 million mt and 334 million mt (100% basis) compared with previous guidance of 330 million- 343 million mt, the company said in a statement Monday.
Analyst Christopher LaFemina of international brokerage Jefferies said that for Rio, the negative impact of lower-than-expected volumes should be more than offset by the positive impact of higher-than-expected iron ore prices, as the iron ore market is expected again to be tight this year.
"Our above-consensus forecast of $85/mt for benchmark iron ore fines compares to the current spot price of $90/mt and is conservative, in our view. Consensus estimates are simply too low," according to the Jefferies analyst.
BMO Capital Markets currently forecasts Pilbara shipments of 337 million mt in 2020.
"Although the company has not commented on the impact on operating costs and capex, we expect the company's maiden Pilbara unit cost guidance on February 26 is likely to reflect the impact of the cyclone disruptions. We currently forecast a unit cost of $14.20/mt for 2020," BMO analyst Edward Sterck said. （S&P Global Platts）