The fall in iron ore prices from the second half this year is forecast to lead to Australia’s export earnings decreasing to A$132 billion in 2021-22 and A$99 billion by 2022-23, according to the quarterly outlook report by the Australian government’s department of Industry, Innovation and Science. Australia’s total iron ore export earnings reached a record A$153 billion in 2020-21. Iron ore prices are forecast to be around $150/mt in 2021, before falling to below $100/mt in 2022.
Iron ore export volumes from the country are expected to grow steadily from 868 million mt in 2020-21 to 939 million mt by 2022-23, as a result of the commencement of several new mines in Western Australia.
According to the report, following record highs during the second quarter of 2021, iron ore prices fell significantly, declining to around $100/mt by mid-September from the highs of over $200/mt seen from May to July. The fall in prices reflects China’s lower steel output from June, with expectations of more modest levels of production for the rest of this year. Falling domestic demand for steel in China, due to a softening in construction activity and implementation of a number of key government policies, has seen prices fall by more than 50 percent from their peak by mid-September.
The Chinese government’s efforts to curb China’s total steel output are expected to persist for the rest of the year. Steelmakers outside the city of Tangshan were ordered to scale back production from June, and provinces such as Jiangsu, Shandong and Anhui plan to cut output in the second half of the year. The government has signaled it is also keen to ensure reduced air pollution for the Beijing Winter Olympics in February 2022, and has mentioned a potential extension of output curbs in the northern provinces through to the end of the March quarter 2022. These policies are expected to decrease iron ore demand and prices by 2022.