The Institute for Energy Economics and Financial Analysis (IEEFA) has stated that the global iron ore market will enter a period of major oversupply and lower prices later this decade with significant new supply of iron ore due to be commissioned over the next few years and with declining demand in China.
The biggest source of new supply will come from Australia-based miner Rio Tinto’s Simandou project, which will be commenced in 18 months and is expected to ramp up the supply to an annual 90 million mt by 2028. In addition, Brazilian miner Vale intends to bring an additional 50 million mt of supply online over the next two years.
Meanwhile, China will seek to recycle more steel going forward, further reducing iron ore demand from the country. On top of this, the steel technology transition from blast furnaces to direct reduced iron-based steelmaking will shift the demand profile towards higher-grade iron ore, the IEEFA noted.