Australian iron ore production potentially to grow in 2020 despite Cyclone Damian and Covid-19

Australian iron ore production potentially to grow in 2020 despite Cyclone Damian and Covid-19

From www.mining-technology.com

Australia, which is the world’s leading producer and exporter of iron ore, experienced slower production growth in 2019 of 1.2%, versus 2.8% in 2018, partly due to the effect of Cyclone Veronica. The cyclone caused production disruption at two of the country’s three largest producers, Rio Tinto and BHP, with respective falls of in output of 3.3% and 0.7%.

In 2020, another cyclone, Cyclone Damian, has impacted output. In February 2020, its landfall severely impacted iron ore mining in the Pilbara mining region. The extensive damage caused by the cyclone to rail, road and mining infrastructure led Rio Tinto to revise its production guidance for 2020 from 330Mt-343Mt to 324Mt-334Mt. Other major miners were not adversely affected, however. Fortescue Metals Group’s latest guidance is for production to be in the range of 175Mt-177Mt, an increase on its previous guidance, whilst for BHP it estimates production will be between 242Mt-253Mt, no change on its original guidance for 2020.

The spread of Covid-19 has not yet affected guidance from the leading miners, with the impact on production restricted to a few junior miners. To contain the spread of the virus, Rio Tinto, BHP Billiton and Fortescue undertook a range of measures including changes to Fly-in-Fly-Out (FIFO) rosters, shifting to two weeks on, two weeks off in the key iron ore mining regions. According to Western Australia’s Chamber of Minerals and Energy estimates, there are about 60,000 FIFO workers across the state’s mines, of which 6,000 essential workers travel into Western Australia from other states. During the peak of the pandemic rosters were changed to relocate 3,000 of them to Perth to keep the business operations running without any major interruption.

Effective measures from the governments and mining companies resulted in control of the pandemic across the mining region and in late May the three major miners announced plans to bring back the traditional FIFO rosters by the end of June, supported by measures such as extensive Covid-19 testing, social distancing and other actions prescribed by the WHO. Overall, assuming each of the majors delivers the mid-point of their guidance, the country’s iron ore production is expected to grow by 0.8% to 919.8Mt in 2020, over 2019, while exports are expected to grow by 1.1%.

Looking ahead, post Covid-19 restrictions, with the support of upcoming mines in the forecast period (2020-2024) the country’s iron ore production is expected to grow at a CAGR of 2.9% to reach 1,033.2Mt by 2024. Some of the key upcoming projects include the South Flank project, which will have a capacity of 80Mt and is due to be operational by 2021. The Central Eyre Iron Project with a capacity of 24Mt, Marillana Iron Ore Project with an 18.5Mt capacity and Ridley Magnetite Project with a 15Mt capacity are amongst the other key projects are expected to be operational within the forecast period. Further, with improved Chinese demand and higher ore production in Australia, exports are expected to post a CAGR of 2.9% to reach 952.2Mt by 2024.