According to a report published by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), in the current fiscal year (July 2010-June 2011) Australia's iron ore production is expected to increase by 5.7 percent year on year to 467 million mt. Increased production from several large projects in Western Australia's Pilbara region is likely to result in higher export volumes. In FY 2011-12, Australia's iron ore export volumes are forecast to increase by eight percent to 437 million mt. Meanwhile, Australia's iron ore export earnings in FY 2011-12 are forecast to increase by 17 percent to US$65.3 billion as relatively lower iron ore prices are expected to be offset by the increase in export volumes.
In calendar year 2011, Australian exports of iron ore are forecast to increase by three percent to 414 million mt, resulting from increased production from expansion operations and a number of mines that commenced operations in 2010. However, growth in Australia's iron ore exports in 2011 will be limited by heavy rain in the first quarter of this year, which restricted production in Western Australia.
Australia's exports of iron ore in 2012 are forecast to increase by 11 percent to 459 million mt, owing to increased production at CITIC Pacific's Sino Iron Project (28 million metric tons) and BHP Billiton's Western Australian Iron Ore Rapid Growth Project 5, on which construction work is expected to finish in the second half of 2011.
On the other hand, highest iron ore spot prices were recorded in February this year reaching US$185/mt FOB Australia for 62 percent iron ore content while the contract prices were recorded at US$172/mt with an increase of 25 percent in Q2 this year compared to the previous quarter. In the second half of 2011, contract prices are expected to ease, averaging around US$159/mt, and are expected to ease further in 2012 to an average of US$146/mt, largely reflecting increasing supply from Australia and Brazil.