Australia’s Department of Industry, Innovation and Science predicts that the spot price for 62% Fe grade iron ore will remain well above US$100/tonne (FOB, Australia basis) for the rest of 2021, according to its latest resources and energy quarterly report. The high iron ore price is supported by robust demand from China and steady supply, it noted.
The average spot price of 62% Fe grade iron ore climbed higher in the first quarter of 2021, averaging above $150/t CFR Tianjin, North China in January and reaching $170/t CFR Tianjin in February, the report said. Prices had hovered at near-decade highs during the two months, and the factors that pushed the price higher will remain until late 2021, the department forecast.
The firm demand from China contributed to the consistently high iron ore prices, the report elaborated, pointing out that growth in Chinese steel production had been driven by the Chinese government’s stimulus measures to support the economy amidst the coronavirus outbreak.
Over January-February, China’s crude steel output reached approximately 175 million tonnes, the latest data from the country’s National Bureau of Statistics released on March 15 showed, with the on-year rise of 12.9% outpacing the 7% annual growth seen in 2020, Mysteel Global notes.
“These strong demand influences have magnified the impact of lower supply estimates from Vale, which has reduced its production guidance significantly over the past 12 months,” the report added.
Although some of the world’s top miners including Vale, BHP and Rio Tinto have plans to expand their capacity during 2021 and bring new projects into production, the resulting growth in output will not lead iron ore prices to dip sharply, the report maintained, adding that iron ore prices will stay firm above $100/t (FOB, Australian basis) throughout 2021.
Meanwhile, the report cited external factors that might impact supply – such as severe weather events where mine operations in Western Australia and Brazil are subject to disruption caused by heavy seasonal rains and cyclones – which may also cause iron ore prices to surge.
Other than the higher prices, the department anticipated that export volumes of Australian ore will increase from 893 million tonnes in 2020-2021 to 1.1 billion tonnes by 2025-2026, as some new mines in Western Australia will commence operations in coming years.
Written by Lea Li, liye@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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