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Australia's marginal iron ore mining firms are preparing to restart operations in 2023, but realising stronger demand could add to the highly inflationary cost environment.
Most of Australia's smaller marginal iron ore mines have shut in the past 18 months. Even Mineral Resources (MinRes), with its much larger balance sheet and ability to absorb some cash losses, started to look at alternate production strategies in October to cut loss-making low-grade fines production.
But the market began to swing in favour of these marginal producers in the final weeks of 2022. First freight rates and then the Australian dollar fell, cutting the cost of delivering iron ore to China.
CuFe was the first to point out that things were improving and could lead to the relatively high-grade producer restarting its JWD mine in 2023. The adjacent C4 mine could follow quickly, with the mines shipping blended cargoes to customers in Asia.
C4 was reopened in early February 2022 when the Argus 58pc Fe price was at $123.40/dry metric tonne (dmt) cfr Qingdao and the Argus ICX iron ore was at $147.10/dmt cfr Qingdao on a 62pc Fe basis. It was closed again in July when prices fell below $90/dmt and $100/dmt, respectively.
While prices have recovered from the lows of $68.45/dmt for 58pc Fe and $79/dmt for 62pc Fe seen on 31 October, they still have some way to go to hit the levels that prompted the reopening of C4 last year.
Prices will likely need to be higher than a year earlier to prompt mine reopening as the cost of mining has jumped, particularly in WA where skills shortages are leading to wage increases. Add to that economy-wide inflation, rising energy costs and higher cost of finance as a result of rising interest rates. (argusmedia)
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