Scotland-based energy research and consultancy company Wood Mackenzie has stated that it forecasts that global iron ore demand will decrease by 62 million mt or three percent over the next 10 years due to declining demand from China, resulting in a 35 percent fall in mine investments through to 2033 compared to the past decade.
Falling blast furnace-based production and increased use of scrap is expected to cut around 270 million mt Chinese iron ore demand over the same period, equal to 20 percent of the country’s current consumption. As China’s demand falls, its domestic iron ore production is expected to halve over the next 10 years due to rising costs and lower-grade resources.
Meanwhile, Wood Mackenzie sees some bright spots for offsetting the decrease in demand. India and Southeast Asian countries are set for robust growth in iron ore consumption, with India becoming a net importer by the mid-2030s.
The research company stated that the transition towards green steel poses a challenge for producers of lower-grade ores, notably Australia. Wood Mackenzie forecasts Australia’s iron ore exports will peak in the next two years before entering a gradual long-term decline. Australian miners are responding to the changing market by investing in technology to make their iron ore suitable for direct reduced iron processes and by decarbonizing existing production.
Saying that the quality differential will be the key to future pricing, Wood Mackenzie stated that it expects rising demand for high-quality lump and pellets will drive a growing premium for these products over the long term. Forecasts for high-grade pellet prices to rise by over 20 percent through the same period are an indication of how the push for green steel is disrupting the market.