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The price of iron ore broke through US$90/t (for 62% Fe material) last week on growing fears of a short-term supply shortage following events in Brazil and Australia. Vale SA has estimated the impact on this year's sales of the Brumadinho tailings dam failure at 50-75 Mt of iron ore; Vale said it now expects to sell 307-332 Mt in 2019. The tightness in global supplies following the tragedy in January at Vale's Feijao operation has been made more severe by the recent tropical cyclones Veronica and Trevor in Australia.

Following the cyclones, Rio Tinto expects a loss of about 14 Mt in 2019 and expects iron ore shipments from its Pilbara operations this year to reach the lower end of its guidance of 338-350 Mt (on a 100% basis). BHP Group has estimated a loss in production of 6-8 Mt due to flooding. Analysts at Sanford C. Bernstein estimate an 8% decline to 273 Mt in total iron ore shipments in the first quarter by the world's major producers.

In a recent research report, UBS increased its iron ore price forecast to US$83/t this year due to the supply disruptions and an anticipated rise in Chinese steel production. However, the analysts still expect prices to fall in the medium term as supplies recover, scrap consumption in China rises and steel usage starts to fall as urban redevelopment comes to an end. Bank of America Merrill Lynch analysts also see prices continuing their rally into the second quarter, flagging "immense supply uncertainty", but Liberum Capital's analysts predict only a 19 Mt reduction in iron ore shipments in 2019, with Vale's sales seen falling by just 44 Mt.

The benchmark price of iron ore retreated slightly at the end of last week, and closed in London on Friday at US$92.80/, up 6.6% on a week earlier. Other major metals were weak last week, with aluminium down 1.3% at US$1,888/t, copper fell 1.1% to US$6,403/t and gold slipped 0.9% to US$1,283/oz. Nickel and zinc both improved, however, up 0.5% to US$13,055/t and 0.2% to US$2,922/t, respectively.

Gold production stalled in the final quarter of last year after growth through the first three quarters. S&P Global Market Intelligence (SPGMI) has estimated gold production of 27.1 Moz in the December quarter. SPGMI notes that falling head grade at many mills, such as Grasberg, Sukari, Blagodatnoye and South Deep, contributed to a significant drop in the December-quarter output. In addition, a number of Barrick Gold Corp.'s assets saw a drop in year-over-year production due to output interruptions (an earthquake at Porgera and safety concerns at Kalgoorlie as a result of rock falls earlier in 2018).

Global gold production was an estimated 107.3 Moz in 2018, some 0.8 Moz higher than in 2017. At the national level there was lower output from China, the US, South Africa, Peru and Ghana (totaling 2.4 Moz) and increases in production from Australia, Russia, Canada, Indonesia and Kazakhstan (totaling 3.1 Moz). The China Gold Association recently confirmed that the country's annual production had fallen for the second consecutive year, to 12.9 Moz, compared with the record output of 14.6 Moz in 2016.

In another recent research report, SPGMI calculated that exploration at 98 gold-containing projects where initial resources had been announced since 2010 had seen resources rising from a total of 112.7 Moz at the time of the initial resource announcement to 216.3 Moz in their most recent resource updates. The owning companies budgeted an estimated US$1.43 billion to discover gold at these deposits, and the 103.6 Moz of added metal implies a weighted average discovery cost of under US$14/oz.

In corporate news, more than 97% of Goldcorp Inc.'s shareholders have approved the US$10 billion takeover by Newmont Mining Corp. Newmont shareholders will vote on the proposal on April 11.

Cash strapped Nautilus Minerals Inc. has seen the resignation of four directors, including CEO John McCoach. The TSX is delisting Nautilus amid a restructuring plan triggered by funding problems over the Solwara 1 copper-gold-silver project off the coast of Papua New Guinea.

Global Markets

The big market news last week was a rebound in sentiment over Chinese economic growth following a flurry of government debt issuance and a boom in infrastructure projects. The country's purchasing managers index jumped in March to 50.5 from only 49.2 in February. This was the strongest reading since last June.

There have also been positive signals from the long-running trade talks between China and the US, with officials saying most of the issues have been resolved. However, the International Monetary Fund said it would be downgrading its global-growth forecast of 3.5% made in January, with the organisation's managing director, Christine Lagarde, saying that countries needed to make "smarter" use of fiscal policies. 

Meanwhile, the pace of growth in global debt at least slowed in 2018, according to the Institute of International Finance Inc., but borrowing by US non-financial corporates approached record levels. Global debt grew 1.4% to US$243 trillion last year, and the IIF warned of the ramping up of corporate borrowing, particularly in the US.