Rio Tinto declares force majeure on some iron ore sales

Anglo-Australian mining company Rio Tinto has declared force majeure on some shipments in the aftermath of Cyclone Veronica, which led to heavy rains and flooding in the Pilbara region of Western Australia earlier this week.

The force majeure is limited to shipments from Cape Lambert A terminal, which sustained damages from the cyclone. The shipments affected could be low-grade products Yandicoogina fines and Robe Valley fines and lump as these are the grades shipped from the 85mn t/yr Cape Lambert A.

Rail and shipping operations at Rio's other major terminals, Cape Lambert B and Dampier, have resumed operations and are ramping up activity. Rio will update on the post-cyclone situation in detail on 16 April when it releases its first-quarter operations data.

The most-active iron ore contract on the Dalian commodity exchange was trading higher by over 4pc after Rio's force majeure announcement.

The Chinese market has so far ignored the cyclone's impact on supplies since mills are not actively buying cargoes as they await China's lower value-added tax rate of 13pc to kick in on 1 April. China's ports also have ample supplies of ores, assuring buyers of availability in the near term.

The effect of the force majeure on the physical market in China may be limited, as the force majeure does not involve Rio's best-selling medium-grade products PB fines and PB lump, which occupy significant space in several furnace burdens across China. Additionally, around 98pc of Yandicoogina and Robe Valley products are sold via term contracts, so spot availability of these grades is anyway quite limited, according to a company presentation in 2018.

China consumes around 39pc of Robe Valley and Yandicoogina products, with 41pc sold in Japan and 20pc in other markets.

Rio shipped 57.4mn t of Yandicoogina and 32mn t of Robe Valley products in 2018.