Iron ore prices expected to remain above $100/mt until mid-2021 

Monday, 21 December 2020 18:07:36 (GMT+3)   |   Istanbul

Australia’s iron ore export earnings are forecast to peak at A$123 billion in 2020-21, according to the quarterly outlook report by the Australian government’s department of Industry, Innovation and Science. An easing of prices and a stronger Australian dollar are expected to push earnings back to a still strong A$95 billion by the 2021–22 financial year. Iron ore prices are expected to remain strong for the next six months. China’s iron ore demand is expected to remain high, though Chinese steelmakers may seek to reduce production should prices remain at a level which renders many of them unprofitable. Iron ore demand in many other countries is expected to remain below its 2019 level due to the shutdowns of plants in Europe and South Asia, which are not expected to return to production until iron ore prices drop.

The iron ore export volumes from Australia are expected to grow from 858 million mt in 2019-20 to 900 million mt by 2021-22, compared to the previous forecast of 905 million mt, as mines open in Western Australia. Output is expected to grow due to several expansion projects in the Pilbara region. Australian exports will remain sensitive to conditions in China, the dominant market for Australia.  

Iron ore prices have risen sharply in recent months, as a result of growing Chinese demand and ongoing disruptions to Brazilian supply. Iron ore prices are forecast to remain well above $100/mt until mid-2021, before easing to just over $75/mt by the end of 2022. 

According to the report, China has become steadily more dominant as a global iron ore destination, with steel production in a range of other countries subject to recessionary conditions in the second half of this year. Chinese demand for iron ore is likely at its peak, with a decline expected over the next 10 years as a growing share of its steel production becomes drawn from domestic recycling. This will result in reduced Chinese dependence on the seaborne iron ore market. Iron ore production in Brazil remains under pressure amid failed stability assessments of dams connected to iron ore facilities, legal actions due to the Brumadinho Dam collapse, and disruptions of port and rail facilities linked to the pandemic.  

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