Commodity Market Report

Global iron ore long-term outlook Q1 2018

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13 April 2018

Global iron ore long-term outlook Q1 2018

Report summary

The Global Iron Ore Market Long-term Outlook provides detailed supply and demand analysis and price forecasts for the iron ore market to 2040. The iron ore market is entering a cyclical downturn with the low point occurring in 2019 (price forecast: $62/t CFR). Breakeven analysis suggests a medium term "floor price" of $50-55/t CFR but we peg our forecast above this level to reflect a committed approach to supply side discipline and value maximisation over growth. Margin compression is inevitable but the transition towards a quality based multi-tiered pricing structure means that suppliers of high grade sinter fines and concentrates will fare relatively well, while suppliers of low grade sinter fines will need to continue offering heavy discounts.

Table of contents

  • Executive summary
    • Demand update: key swing factors
      • The pace of investment in Chinese infrastructure
      • Scrap use and Chinese EAF capacity growth
      • A global focus on productivity
      • Supply update: what's changed?
        • Supply update: key swing factors
          • Vale's strategy
          • Simandou
          • Chinese domestic iron ore production
          • Price forecast
            • Key "swing factors" that could significantly alter our long term view on iron ore include:
              • Limited investment in major greenfield projects
              • China's "Asian dream"
              • Scrap
              • India's iron ore sourcing
  • Demand
    • 2018 set to be another bullish year for crude steel production growth
    • But China will not post the biggest gains
    • Chinese hot metal output to peak in 2020
    • Which will lead to Chinese iron ore consumption declining from 2020
    • World ex-China: Hot metal growth to slow, but continue
    • Use of high quality iron ores will mean less total tonnage is consumed
    • India will not replace Chinese declines in seaborne iron ore demand until the late 2020's
    • China
      • Demand
      • Hot metal
      • BOF dominates
      • Control policies that constrain steel supply and demand will remain in place over the medium term
      • Strong demand for pellet
    • India
    • Japan
    • South Korea
    • Taiwan
    • Other Asia
    • EU28
    • Turkey
    • CIS
    • Russian Federation
    • Ukraine
    • United States
    • Mexico
    • Canada
    • Brazil
    • Other South American countries
  • Africa
  • Australia
  • Middle East
  • Supply
    • The outlook to 2020: a further upward adjustment to exports
    • The outlook post-2020: small upward adjustment to exports
    • Key changes to global export forecast
      • Australia
      • Brazil
      • Asia
      • Africa
      • Asia
        • China
          • Lower demand and environmental constraints cause domestic production to decline
          • Environmental constraints remain at the fore
        • India
          • India - overview
          • India – medium term view
          • India – long-term view
        • Other Asia (ex-China, ex-India)
      • Europe
        • Sweden (LKAB)
        • Norway
      • CIS
        • Russian Federation
        • Ukraine
        • Kazakhstan
      • North America
        • Canada
        • United States
        • Mexico
      • South America
        • Brazil
          • Vale
          • Other Brazilian Producers
        • Other South America
      • Africa
        • South Africa
        • Mauritania
        • West Africa (excluding Mauritania)
          • Overview
          • Sierra Leone
          • Liberia
          • Guinea
          • Australia
            • Overview
            • Key changes to our supply forecast for Australia
          • Middle East
  • Supply-demand balances
    • Short term outlook (revised up):
    • Medium term outlook (revised down):
    • Long term outlook (no change – but positive price risk):
      • Upside risk:
      • Downside risk:
      • The Medium Term Outlook to 2020
        • What’s changed?
          • Chinese hot metal production – medium term forecast raised but close to peak
          • EAF gets a short term boost
          • Stricter Chinese environmental compliance
          • Chinese pellet consumption up
          • Iron ore price differentials to remain wide
          • Higher than previously expected seaborne supply
          • Lower than previously expected Chinese domestic supply
        • Iron ore costs and prices – the medium term view
          • Price outlook for lump
            • Past trends in lump premia
            • Future trends in lump premia
          • Price outlook for pellets
            • Past trends in pellet premia
            • Future tends in pellet premia
            • The Long Term Outlook (post 2020)
              • Methodology
              • Long run trade balance
              • Long run incentive price

Tables and charts

This report includes 48 images and tables including:

  • Europe: key demand forecast data
  • North America: key demand forecast data
  • South America: key demand forecast data
  • Middle East: key demand forecast data
  • Key demand forecast data
  • Global consumption of iron ore by product
  • Growth in iron ore consumption and imports
  • Demand: Table 2
  • Indian net-imports of seaborne iron ore will grow - but not until the late 2020s
  • India will never replace China as the source of global seaborne iron ore growth.
  • It will take until the late 2020's until India begins to compensate for the decline in Chinese seaborne iron ore imports.
  • Japanese steelmakers are increasing the use of pellet in the burden mix...
  • ...as evidenced by a spike in imports.
  • CIS: key demand forecast data
  • US seaborne imports of iron ore will rise this year
  • The BoF route will remain dominant in China
  • Hot metal's share of metallic mix dips below 80% post-2030
  • Iron ore demand falls post-2020 on lower hot metal output
  • Pellet demand will outperform in long term
  • Demand: Image 7
  • Asia (ex-China): key demand forecast data
  • Iron ore exports by country
  • Iron ore exports by company
  • Iron ore production and exports by major country
  • Iron ore exports by key company
  • Asian exports of iron ore by country (Mt)
  • Iron Ore Exports: Brazil versus Australia
  • Share of Global Exports: Brazil versus Australia
  • Iron ore price forecast: sinter fines, FOB Australia
  • Iron ore price forecast: sinter fines, CFR China
  • Iron ore price vs cost of production
  • CFR China cost vs iron ore price
  • Prices need to remain low enough to discourage Chinese restarts and/or Indian exports.
  • Point of intersection - 2017 $72/t, 2020 $56/t
  • Iron ore price forecast: fines (62% Fe), US$/dmt
  • China's rising iron ore import dependency
  • Chinese ore production: long term forecast
  • Goan ore – a smaller share of a smaller pie.
  • India is now a relatively insignificant supplier to China.
  • Iron ore price and price differentials
  • Composition of seaborne supply
  • Iron ore lump price
  • B/F pellet price
  • Global seaborne trade in iron ore
  • Iron ore trade balance and price forecast
  • long run supply "gap" analysis
  • Incentive price analysis – selected projects only
  • Incentive price analysis – selected projects

What's included

This report contains:

  • Document

    Global iron ore markets long-term outlook data 2018 Q1.xls

    XLS 1.16 MB

  • Document

    Global iron ore long-term outlook Q1 2018

    PDF 1.15 MB

  • Document

    Global iron ore long-term outlook Q1 2018

    ZIP 1.39 MB

  • Document

    Executive summary

    PDF 97.99 KB

  • Document

    Demand

    PDF 238.47 KB

  • Document

    Supply

    PDF 254.10 KB

  • Document

    Supply-demand balances

    PDF 722.42 KB

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