Australian iron ore miners face limited Hormuz impact
- Sydney (26 April)
Australian iron ore miners – who rely on diesel-powered heavy vehicles – are not facing significant operational challenges linked to Iran’s closure of the Strait of Hormuz, three of the country’s largest producers said last week.
BHP is well positioned to handle industry-wide energy pressures, the company’s Chief Executive Officer, Mike Henry, said on 22 April.
Fortescue and Rio Tinto also have enough diesel to support their operations in Western Australia (WA), but are monitoring the situation and have contingency plans in place, they said last week.
“What we’re seeing across the supply chain is that visibility remains relatively short … [but] we have the fuel we need in the near term,” Fortescue’s Director of Mining Operations Graham Howard told investors on 24 April.
Fortescue will focus on production-critical tasks, rather than longer-term supporting tasks that consume a lot of diesel, if it begins to face supply challenges, Dino Otranto, the company’s CEO for Metals and Operations, told investors.
Rio Tinto is in a similar position. “We have relatively limited visibility of how the ongoing conflict will affect supply chains in [July-December],” the company said in a quarterly report on 21 April. It expects each $10/barrel (A$14/barrel) increase in oil prices to push up its iron ore production costs by $0.15/tonne from May.
But Rio Tinto does not appear to be worried about fuel supply shortages. It sold eight million litres of diesel to WA’s government on 23 April, pushing up the state’s strategic fuel stockpile to 12 million litres.
The WA Government created its stockpile on 14 February to help remote communities and producers handle localised fuel shortages.
“We’re glad we’re in a position to contribute to the State’s diesel supplies and we hope it goes some way to easing the pressure on communities and farmers at this challenging time,” Rio Tinto Iron Ore’s Chief Executive Officer Matthew Holcz said.
Australia’s iron ore producers accounted for 24.7% of the country’s total exports in 2024, data from the Observatory of Economic Complexity show. Over 80% of Australian iron ore exports went to China that year, OEC data show.
China centralised iron ore purchases in 2022 through the China Mineral Resources Group (CMRG) – a state-owned buyer – to support domestic producers.
CMRG and BHP signed a new long-term sales agreement last month – following months of negotiations – that included shipping rebates for some Chinese buyers and a mixed US dollar-yuan ore pricing formula, Lithos has learned.
Iron ore contract pricing decisions impact state-level finances. Australia’s largest miners generally pay a 7.5% royalty on iron ore exports to WA’s government. The WA Government expects to collect A$8.2 billion in royalties over the 2026 financial year, according to the state’s budget.
By Avinash Govind