Iron ore had a carousing 2019 — for all the wrong reasons. A fatal dam collapse in Brazil, followed by a tropical cyclone in Australia and battered production sent prices to their highest level in five years. Early figures from BHP and Rio Tinto show just how much benefit both have reaped. With supply coming back, Chinese mills under pressure and Beijing’s infrastructure investment looking inadequate to keep the music going, prepare for a more sober 2020.
Production figures from BHP on Tuesday, as with Rio Tinto last week, will cheer investors and fuel hopes of one-time payouts. The average price at which BHP sold a metric ton of iron ore in the six months to end-December was just more than $78, more than 40% higher than a year earlier. Considering unit costs that probably hover around an underlying $13 per ton, the level reported for its last financial year, that’s quite a margin — and quite some cash flow. It’s a similar story at Rio...
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