UPDATE: We recently published an updated report on our iron ore monthly insights, featuring our Q1 estimates for each company. Our monthly report is released two to three weeks earlier than public company data. We currently distributed our monthly report on FactSet and Thomson Reuters.
Back in November, the Chinese government imposed regulations on steel production to curb the pollution in areas surrounding Beijing. We predicted that the restrictions would pull the players in iron ore industry in opposing directions: While the general reduction of steel production would reduce the overall demand for iron ore, the intense crackdown on domestic supply would create a surge in demand for high-grade iron ore from Australia.
But when we first reported on the crackdown, it was unclear how major Australian producers, Rio Tinto, BHP and Fortescue would be affected, since they produce slightly different grades of iron ore. Rio Tinto and BHP produce higher grade iron ore while Fortescue produces a lower grade. In the last several months we have seen that the producers of high-grade iron ore, Rio Tinto and BHP, were unaffected by the Chinese regulation.
On March 7, we published a report on their February 2018 exports. Compared to the prior year, Rio Tinto exported approximately the same volume and BHP even saw a 14% increase in shipments. However, Fortescue took a huge hit. They saw a 7% decline in shipments compared to the prior year. In fact, Fortescue lowered their price realization guidance in March. At this juncture, it is possible that the company will have to lower its volume guidance for the year.
For a copy of our monthly iron ore report, please reach out.