Over the remainder of 2010 and in 2011, the combination of increased Australian and Brazilian iron ore exports and the assumption that the Karnataka State government in India will remove the ban on iron ore exports before the end of 2010 is expected to result in lower prices on the spot iron ore market. For the calendar year 2010 as a whole, iron ore spot prices are forecast to average US$134/mt and then to decrease in 2011 to US$105/mt, according to a report released by the Australian Bureau of Agricultural and Resource Economics - Bureau of Rural Sciences (ABARE-BRS).
Reflecting higher forecast steel production, world trade of iron ore in 2010 is predicted to increase by 10 percent, reaching 1 billion metric tons, according to the ABARE-BRS report. In 2011, world iron ore trade is forecast to increase by a further eight percent to 1.1 billion metric tons. Australia and Brazil will be the main contributors to this growth.
For 2010 as a whole, Brazil's iron ore exports are forecast to increase by 14 percent to 302 million metric tons. In 2011, Brazil's exports are forecast to increase by a further 10 percent to 333 million metric tons, as pellet production is assumed to operate at full capacity and as Vale's 20 million mt annual capacity expansion in the Carajas region ramps up.
In 2010, Australia's exports of iron ore are forecast to increase by nine percent to 397 million metric tons. This growth is supported by the completion of Rio Tinto's Mesa A project and BHP Billiton's Rapid Growth Project 4, both of which commenced production in early 2010. In 2011, growth will be supported by the continued ramp-up of these projects and others scheduled for completion in the fourth quarter of 2010, including CITIC Pacific's Sino Iron Project (26 million mt annual capacity) and Fortescue Metals' capacity expansion at Chichester Hub to 55 million metric tons a year, both scheduled to start by the end of 2010. Reflecting recent expansions, Australia's iron ore exports are forecast to increase by 10 percent to 437 million metric tons in 2011.
In 2010, India's exports of iron ore are forecast to remain largely unchanged at around 116 million metric tons, supported by higher domestic production, which is currently outpacing domestic demand. This is based on an assumption that exports from Karnataka will resume before the end of 2010, either through reopened ports in the state or through ports of neighboring states. However, if the ban remains in place and effective, India's exports will be lower than currently forecast.