Record iron ore prices spurring spending, and hiring, in Labrador, says union head
Recent record prices for iron ore are welcome news in Labrador, one of the world's largest producers of the mineral.
Paul Gray, vice-president of iron ore markets for Wood Mackenzie, a global energy research and consultancy group, said all producers should benefit from the surging price — which reached more than $237 US per tonne last week before subsiding. The price has been steadily climbing since February, with a surge this month. On Monday, the price closed at more than $217.
"What we've seen over the past week is really unprecedented," said Gray.
With four mines in operation, the region along Labrador's southwestern border with Quebec known as the Labrador Trough is poised to benefit from the upward trend, said Gray.
Producers include the Iron Ore Company of Canada, owner of the region's largest mine, near Carol Lake, which is operated by Rio Tinto. IOC employs nearly 2,000 people at its Labrador City site nearby.
Between reserves and undeveloped resources, the company has access to three billion tonnes of iron ore.
But it's not just its quantity that makes Labrador's reserves such a sought-after commodity in today's market. Quality, Gray said, is also a factor.
Pricing, he explained, is based on ore that is 62 per cent iron. But the high-grade pellets and concentrate produced at Carol Lake are 65 per cent iron, and thus higher quality.
"That's exactly what the market desires at the moment," Gray said.
In addition to overall price, Gray adds, the premium for high-grade iron ore — such as is produced in the Labrador Trough — has also increased.
"Those producers should fare even better than the industry average," he said.
Gray said he thinks the price is being driven by "headstrong demand" for seaborne iron ore from China's steel industry, as well as diminished supply due to disruptions in iron-rich regions like Brazil.
Michael Furlong, president of United Steelworkers Local 5795 in Labrador City, says in a region where so many depend on the industry, the soaring price of iron ore spells success.
"As prices go up, we see more things grow here," Furlong told Labrador Morning. "It's very uplifting to our economy."
He says the uptick in prices is causing more spending, and more hiring, in the area.
"It puts a lot of drive in local mines," Furlong said. "As long as [prices] stay up, things should be good in this region."
But whether they will last is difficult to tell, says Paul Gray.
"We didn't predict this," he said. "I don't think anybody predicted this, to be honest. Not to this extent."
Price cooldown expected
Gray expects Chinese demand to slow in the second half of the year, with the country's construction and public infrastructure blitz — an effort to offset the pandemic's economic impact — already cooling off.
A price drop in the next few months wouldn't surprise him. But anything is possible, he said.
"If we do see some kind of hiccup on the seaboard supply of iron ore, it wouldn't take much to push prices even higher."
Furlong is opting to focus on the present.
"The thing I think everyone needs to be aware of is that we are going through good times and hopefully they can last."
