Following our reporting, Rio issued the following statement to FreightWaves.
“Rio Tinto confirms that a fire broke out on Saturday night in a screen house at our East Intercourse Island port operation in the Pilbara. Emergency services responded to the incident and the fire was brought safely under control. Importantly, no one was injured. Operations at part of the facility have restarted while impacted areas remain closed. An investigation to establish the cause of the fire has commenced.”
FreightWaves sought further details but the company declined to discuss the matter.
The owner of Dampier port, the Pilbara Ports Authority, was contacted for information. A spokesman said that no-one had reported to the Authority that there had even been a fire.
We understand that shipping operators from around the globe have been seeking information but sources claim that information is not being provided.
Our previous reporting, based comments from informed sources, said that two screen houses had affected whereas Rio indicates that only one screen house has been fire damaged, so there is a disparity between the two sets of reports.
A screen house is used to separate lumps of iron ore from iron ore fines (powdered iron ore). A lump of iron ore will melt more easily in a steel making blast furnace as heated air can flow around it. Fines may smother the air flow in the furnace and so need to be made into briquettes first. Fines can be cheaper than lumps though, and can be more precisely mixed into a given blend as specified by customers.
Industry sources say that if screen houses are damaged then dry bulkers cannot load. Accordingly, it follows, that if some screen houses are damaged and are out of action, then supply will be disrupted. Industry executives have previously indicated that further disruption to the north west Australian ore production could adversely affect international iron ore prices and dry bulk shipping.
Of late there have been several iron-ore supply shocks. There was an appallingly tragic mining-related tragedy at Brumadinho, Brazil when a dam collapsed with loss of life. That tragedy has removed 40 million metric tons of iron ore from the market. A metric ton is equivalent to 2,204.6 U.S. pounds. Removal of that supply increased the iron ore price but depressed the capesize dry bulk rates, sources told FreightWaves.
Turning back to Australia, and Rio Tinto’s Port Walcott (or, as it’s also known, Cape Lambert) is one of the world’s largest iron ore export ports. It’s probably the second-largest iron ore export port in the world with 170.3 million tons of iron ore exports handled last year. But Walcott was clobbered a couple of weeks ago by Cyclone Veronica, which knocked out three or four of its eight berths and caused such a loss of power that the port can only load in daylight hours until repairs are effected. The industry is waiting for a production update from Rio Tinto to discover just how much iron ore supply was removed from the market.
The passage of Cyclone Veronica also caused the other internationally significant ports along the north west Australian ports to suspened operations, so that’s further supply taken out of the market.
And now there’s been a fire at Dampier, which is probably the world’s third largest iron ore export port with about 146.6 million tons of iron ore throughput.
Any temporary supply to the north west Australian ports is potentially internationally significant simply because of their volume of throughput and Australia’s sheer dominance of the international iron ore markets.
According to statistician “Statista.com”, there was about 2.49 billion tons of iron ore produced in 2019. Australia produced about 900 million tons of it, which is about 36 percent of world production. Brazil was in a far distant second with 490 million tons, about 19.7 percent of world production. The next three biggest producers, China, India and Russia, together produced about 635 million tons, which is about 25.5 percent of 2018 world production. China, India and Russia mostly consume what they produce while Australia exports pretty much all of it.
And that means Australia exports about 49 percent of all traded iron ore, based on calculations using Statista.com data. Australia’s Department of Industry gives slightly different figures in its Resources & Energy Quarterly – it says that the country exported 836 million tons which accounts 53 percent of world iron ore exports. The Quarterly doesn’t provide precise figures but, in any event, it’s a pretty close match between the two sets of data.
The Australian north west ports of Hedland (509 million tons or iron ore), Dampier (approx 146.4 million tons or iron ore) and Walcott (170.3m) together handled throughput of 825.9 million tons of iron ore. And, using the Department’s figures to do the math, that means that the three north west ports account for about 98.8 percent of all of Australia’s iron ore exports. And Australia iron ore exports account for about 53 percent of all globally traded iron ore.
All other exporting countries combined, and that includes South Africa, Ukraine, the U.S. and Canada among many others, together produce about 466 million tons of iron ore, accrording to Statista.com. We don’t know how much of that is actually exported and, in any case, that 466 million tons figure is not even equal to the throughput at Australia’s Port Hedland.
So it’s not hard to see that anything that knocks out, or disrupts, the Big Three Australians is bad for the global iron ore trade.
And they have been disrupted. Hedland, Walcott and Dampier have recently had operations temporarily suspended (but they’re open now). Meanwhile Walcott and Dampier have suffered actual damage which is causing ongoing throughput issues.
In a tangentially related update, the Pilbara Ports Authority has recently indicated the scale of throughtput losses that can probably be attributed to Cyclone Veronica. The Authority as a whole handled 50.3 million tons of iron ore in March 2019. That’s 13 percent down compared to March 2018. Hedland itself handled 36.7 million tons in March 2019, down 14 percent on the prior corresponding period. Hedland operations were suspended for 92.5 hours during Cyclone Veronica. Dampier handled 12.5 million tons in March 2019, down 12.5 on March 2018. Dampier operations were suspended for 132 hours during Cyclone Veronica.
Rio released data in early April that gave some indicating the scale of the loss of throughput at Port Walcott. However, it buried the bad news by giving an aggregate estimated loss for the passage of the cyclone, the time taken to repair the damage plus losses from a completely unrelated fire in January. Rio said that, together, those three disruptions had caused production losses of 14 million tons of iron ore. Incidentally, Rio barely disclosed the existence of the January 10 fire. FreightWaves checked through the releases to the Australian Stock Exchange and on the company’s website. There was a single, solitary, one-line mention of the earlier fire in its January 18 production update. And the company didn’t reveal any figures and hardly released any details of that January fire in its production update.
Finally, some good, weather-related, dry bulk news.
Cyclone Wallace has completely missed the north west coast of Australia and appears to be heading out into the southern Indian Ocean where it will likely dissipate. Meanwhile, a tropical low has developed off the northern coast of Australia. The Australian Bureau of Meterology, this morning (Australian Eastern Standard Time) told FreightWaves that this low may strengthen into a cyclone but it is “unlikely” to do so. Whether a cyclone or a tropical low, the Bureau’s computer modelling indicates that it will probably head out to sea.