Mining commodities have seen an uptick due to the current flooding around Brisbane, Australia. An example being Iron Ore, which is key to the production of Steel.
The enormous scope of these floods is astounding and has affected an area roughly the size of Germany. Mining giant Rio Tinto (RIO) has limited Iron Ore operations in this region, but due to rising water levels access to ports has been severely disrupted.
It’s no secret that commodities are especially sensitive to natural disasters. However, I found this case particularly interesting because we see how RIO has made its bed with Steel over the past five years.
As both the country and the Mining companies cope with the damages from this disaster, I would expect a continued drag on both the Aussie dollar and RIO as the country gets back to business as usual. People are underestimating just how bad it is. A better estimate that these floods may result in the loss of around 1% of GDP for the year.
– Sifiso Takirambudde