Iron Ore Ultimate Health Chart, page-30

Hi All,

Slightly clearer version below. 2019 Blast Furnace Rebar Margins included only data change from yesterday.

An example on how to read the updated chart is for example, the broken red lines are the 2018 Blast Furnace Capacity Utilisation % whereas the unbroken red lines are the 2019 Blast Furnace Capacity Utilisation %.

During the National Holiday Week in early October, production was greatly affectedwhereas there wasn't so much for an impact in 2018. Yesthere have been curbs imposed at various times but much momentum was lost this year due to the holiday. It has only been

since late Nov that capacity utilisation % is running greater than the corresponding time last year. Pre Holiday Week was the last time capacity utilisation was running higher in 2019. Capacity utilisation had been steadily climbing however from October to November 2019 despite trailing capacity utilisation during the same period. ​

Despite the utilisation index running lower between late Sep and Nov 2019 compared to 2018, steel inventories were drawn down much more aggressively than the same period 2018. The green lines in the below chat show this.

Rebar margins have skyrocketed since late October 2019 as well despite IO prices being relatively subdued.

All these above factors are indicating likely

strong downstream demand. (Capacity utilisation % ramping up in the last month, rebar margins skyrocketing and considerable drawdown of steel inventories)​

We are now in restocking period as well in addition to the strong downstream demand. CNY will also fall 1.5 weeks earlier in 2020 than 2019, which will support accelerated restocking efforts.

Brazil shipments continue to underperform despite the occasional week where shipments are in line with the same corresponding week in 2018. Brucutu, Vale's heartland IO mine will now be operating at 40% capacity for the next two months at this stage. Australia's IO shipments have rebounded well since mid October and have mostly tracked higher than the same period in 2018. The last 2 weeks have seen weekly shipments to China track mostly in line with 2018. The continual poor shipping data coming out of Brazil combined with subdued shipping numbers from Oz in the last couple of weeks may see low arrivals into China's ports in the short term at least.

Port stock differences now between 2019 and 2018 are narrower than they were back in July. Port stoks have however declined in the last 1.5 months after peaking just under 130mt. There was a large increase during the Holiday week, which coincided with a massive drop in production rates during that time. The accelerated drawdown in inventories (as mentioned above) would be attributed to strong downstream demand but also port stocks not being drawn down aggressively. IO stocks in 2019 have been relatively constant despite steel production increasing in the higher single digits overall. (IO stocks at steel mills I'm referring to above)

Therefore, days/week cover of IO stocks have not kept pace with the higher steel production rates. Possibly the higher Brazil IO export numbers in July (almost the same as the corresponding time than 2018) and higher Oz shipments earlier this FY than 2018 largely due to maintenance plans by the majors occurring in Sep/Oct this year compared to July in 2018 would have contributed to the gap narrowing during the Sep quarter.

Let's see what this week brings!

Cheers