Rio Tinto steals Vale's iron ore crown ahead of Q4 decider

Iron ore miners Rio Tinto and Vale remain nose to nose in claiming industry leadership for 2015.

Rio Tinto’s new-found leadership status was confirmed by iron ore shipments stretching to a record 91.3 million mt in the third quarter, around 5 million mt more than Vale’s quarterly total for its fines, run-of-mine ores and pellet sales, latest company data show.

Vale, however, had something to brag about.

“We have the lowest cost in the world,” Vale CFO Luciano Siani exclaimed as the company unveiled its Q3 figures this week.

The outcome of lower costs aided by a weaker real, however, may result in prolonged and even weaker global iron ore prices.

A selloff in the real came as a result of political infighting, and slower Brazilian growth and with it steel demand, leaving Vale more exposed as its largest customers, China and Europe, fight over steel trade.

Vale is trailing faster growth from Australian majors, who this year posted stronger increases to volumes from new capacity ramp-ups. Vale faced delays in expansions.

The Rio de Janeiro-based company is still a year or more from making a bigger mark when it opens further new sections at its Carajas mine in northeast Brazil.

Vale’s Q3 shipment total of 86 million mt compares to shipments of 83.6 million mt in the second quarter — when Rio Tinto shipped 81.43 million mt — and 73.6 million mt in Q1, as iron ore operations in Brazil recovered from seasonal lows.

Rio’s iron ore production of 86.1 million mt in Q3 fell short of Vale’s quarterly record at 88.2 million mt for the period.

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In the ring, judged blow by blow alone on output and shipments of iron ore and pellets each quarter this year, Vale would lead Rio Tinto 4-2.

For the first nine-months of 2015, Vale’s production overall is around 8 million mt higher than Rio Tinto’s at 248 million mt, while Vale’s shipments are just over 3 million mt higher.

In terms of cash costs, the weak Brazilian real and cost improvements took Vale’s FOB costs down to $12.70/mt in Q3.

However, with Rio Tinto last guiding FOB cash costs just a few dollars higher, Australian miners still have an advantage in delivered costs to China, the main importer.

Based on standard Capesizes, the voyage from Tubarao to Qingdao averaged at $12.433/wet mt in September, compared to $5.503/wmt from Western Australia to the Chinese port last month, based on Platts assessments.

Lower costs may depress iron ore prices, analysts fear.

As cost curves drop further, led by the real’s weakness and soft Aussie dollar, and iron ore demand limps, Vale believes seaborne miners need to replace some 80 million mt of production elsewhere. Around half of the estimated volumes are still to come out from China, it expects.