Capesize’s growing role in Canada’s Arctic Iron Ore exports

Canadian iron ore exports in q3 rose 0.9 Mt year-on-year to 19.0 Mt this year, the highest since the same quarter in 2021. Strong shipments in the quarter have been supported by the highly seasonal exports from Canada’s most northern iron ore export port, Milne Inlet, which exports Canada’s Baffin Island iron ore. However, a new feature this year has been the use of larger vessel types for these exports.

Baffin Island iron ore exports typically take place during August-October when sailing to Milne Inlet becomes viable due to ice melt. This trade has been primarily Panamax-dominated, seasonally drawing in ice-class vessels from the North Atlantic each year. Shipments tend to be destined to Europe, as Baffin Island benefits from some of the highest grade iron ore in the world and, as a result, can be used to reduce the emissions from steel making. These deposits are crushed and screened on site, and do not require concentrating or processing and therefore do not produce tailings. Additionally, this year Canada added high-grade iron ore to its list of critical raw materials.

Shipments from Milne Inlet recorded a 0.7 Mt year-on-year increase to 4.5 Mt in 3q24. October represents the final month in the summer season for shipments from Milne Inlet, which last year reached a record 2.1 Mt.

Cargoes carried on Capesize (100k+ dwt) vessels have more than doubled from last year, rising 0.7 Mt to 1.3 Mt in 3q24, catering for the incremental year-on-year increase in volumes. Sub-Capesize exports have remained flat on the year, although, reaffirming the shift to larger vessels, Panamax usage has increased slightly as no Supramax vessels have been used so far this year.

The increased use of Capes in the trade follows a lift in total volumes within the short-shipping window. This, combined with attempts to control the number of ships in the trade to limit the environmental impact in the marine protected area, has supported the use of Capes to facilitate the lift in volumes. Furthermore, while Capes in this trade are primarily baby Capes, Newcastlemaxes have also been used.

Vessels used for Milne Inlet exports are mainly sourced from the Continent. While Rotterdam-Milne Inlet is not as far in terms of distance as US East Coast, slow ballast speeds add to increase tonne-day demand on the route. Slower speeds when approaching Milne Inlet to mitigate the negative impacts on marine life, alongside the use of vessel convoys, adds to the duration of the ballast leg of the journey. Comparing the Milne Inlet ballast leg to that of Sept-Isles, another Canadian iron ore export port, Milne Inlet ballast speeds are typically slower.

Baffinland has a standard permit to export 4.2 Mt; however, since 2018 the company has applied for temporary permits to allow shipments of up to 6 Mt a year. The volume restrictions are largely in place to protect marine life and minimise the impact on the local Inuit population. The company is due to keep exporting via Milne Inlet at these levels using trucking until 2030 and then ship stockpiles for two years, newswires report. After this time, the Steensby Inlet project, which had its rail line approved back in 2012, would facilitate a massive increase in exports to around 18 Mtpa.

By Cara Hatton, Dry Bulk Analyst, Research.