BMO director, equity research, metals & mining - international, Edward Sterck, said a restart of Vale's stalled 30Mtpa Brucutu mine in Brazil could restore 15Mt of production in the second half of this year. But there was no sign of a restart yet.
Global iron ore production has been impacted in the first half of 2019 by Vale's dam failure at Brumadinho in Brazil, and the continuing legal issues around Brucutu, as well as weather and fire disruptions affecting Rio Tinto and BHP in Western Australia. BMO says shipping data suggests Rio Tinto and BHP are back on track, but Vale continues to struggle.
A need for 60Mt of swing production - US$6 billion of iron ore sales - could open up opportunities for Australian and other producers, though Sterck suggested to Mining Journal that higher production and earnings were "already baked in" to valuations.
"The iron ore price remains above our forecasts, suggesting upside potential to estimates," he said.
"The high price should outweigh the supply disruption/shortfall [in the first half]."