The ongoing strength in the iron ore market should bode well for companies with projects in advanced stages of development, like Alien Metals (LON:UFO).
Alien’s projects in Australia are situated perfectly for the ultimate product to be shipped out to the country that is continuing to drive the iron price strength, China.
Iron ore has stayed consistently strong throughout the coronavirus crisis, as demand has managed to hold up even as supply has been curtailed by the shuttering of several major mines.
In particular, Brazilian exports have been seriously hit, down to 21.5mln tonnes in May of 2020 when compared to the 29.9mln tonnes exported in the same month the previous year, according to data cited by broker SP Angel.
That’s a fall of more than 25% from one of the world’s biggest exporters, and with mines also shutting elsewhere, the industry has struggled to take up the slack.
Meanwhile, on the demand side, China kept most of its steel mills open during the coronavirus crisis, and now that the emergency there is largely over, has been ramping up production towards pre-crisis levels pretty rapidly.
It’s for that reason that iron ore September futures recently hit US$108.9 per tonne on the Dalian Commodity Exchange, its highest level since the contract was launched in 2013.
And as if further evidence were needed, Chinese PMI numbers show the industry coming back strong. Overall manufacturing was 50.6 in May, but within that, the steel industry PMI returned to positive levels, from 45.9 in April, while steel new orders jumped from 39.9 to 52.9.
The iron ore to feed this renewed steel demand is going to have to come from somewhere, and with Brazil still in the grip of the virus, it looks as though Australia, where the virus is no longer prevalent, will be stepping up.
Major production already exists in Australia, but now that supply constraints have once again been imposed, new projects will be coming once again onto company radars.
In March, Alien completed on the acquisition of two iron ore projects in Western Australia, the Hancock Ranges project, and the Brockman project. Both are famous mining districts in Australia, and both projects already boast significant-sized resources.
The company also owns a diverse portfolio of other assets, including silver in Mexico.
Published at Wed, 03 Jun 2020 11:04:00 +0000-Alien Metals likely to be boosted by ongoing strength in iron ore price