Global iron ore long-term outlook Q1 2019 Report

Commodity Market Report 02 April 2019

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Why buy this iron ore report?

You'll get in-depth analysis of the dynamics influencing the global iron ore markets in the short and long term.

We unpack the impact of the recent production cuts in Brazil on supply, iron ore demand and pricing. We also identify key risks that could pose a threat to our long-term view.

What key questions does this iron ore analysis report answer?

How recent iron ore production cuts in Brazil will impact supply, iron ore demand and pricing over the next five years.
How long will China remain the dominant player in the iron ore market?
When do we think India will take over the baton as the main driver of growth?

Report summary

Uncertainty over the scale and duration of Brazilian production cuts in the aftermath of the Brumadinho tailings dam failure has changed the entire psyche of the iron ore market. Our revised forecast shows a global seaborne market that is closely balanced, with a tendency towards under-supply. No one wants to risk being short while the market is so finely balanced and vulnerable to further supply side shocks. We have therefore raised our CY 2019 price forecast to $82/t CFR, 22% above our previous forecast. We have made a smaller, 15%, upgrade to our price forecast for 2020: now $75/t CFR. No change to our long term assumption that a price of at least $65/t CFR (real 2019 terms) will be required to balance the market.

Key "swing factors" that could significantly impact the long term view:
Overview
- China – domestic production and scrap use will offset tightness in 2019 seaborne supply
- India – consumption growth will not impact the seaborne market until the mid to late 2020s
- EU28
- Japan
Asia
- China
- China's hot metal production revised upwards
- Scrap demand revised up more as hot metal growth lags behind steel
- Iron ore demand to increase
- Capacity
- Blast furnace capacity utilisation to improve in the medium term
- Hot metal capacity to increase 11 Mt net in the contestable market in 2020-25
- Risks
- Hebei steel restructuring plan extends capacity rationalisation
- India
- Steel production forecast remains conservative
- The increasing BF-BOF steelmaking is driving iron ore demand growth
- Significant upwards revision to our long-term pellet usage rates
- Japan
- South Korea
- Taiwan
- Indonesia
- Vietnam
- Other Asia
Europe
- EU28
- Turkey
CIS
- Russia
- Ukraine
North America
- United States
- EAF production will continue to dominate the industry
- Changing metallics demand
- Mexico
- Canada
South America
- Brazil
- Other South American countries
Oceania
- Australia
Middle East and Africa
- Iran
- Algeria
- South Africa
Overview
- Key changes to our forecast
- Australia
- Brazil
- Asia
- Africa
Developments in the world's major seaborne suppliers
- Australia
- Brazil
- Vale
- Africa
- South Africa
- West Africa
- Canada
- Ukraine/Russian Federation/Kazakhstan
- Russian Federation
- Ukraine
- Kazakhstan
- Chile
- Peru
Key supply side developments in China and India
- China
- Domestic supply to rise in 2019
- More pellet capacity approved – trend towards cleaner grate kilns
- India
Overview
- Short term outlook (revised up):
- Medium term outlook (revised up):
- Long term outlook (no change – but positive price risk):
- Long run price spreads:
- Key "swing factors" that could significantly impact the long term view:
- Upside risk:
- Downside risk:
- 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-2025)
- Methodology
- Long run trade balance
- Long run incentive price

Tables and charts

This report includes 46 images and tables including:

Europe: key demand forecast data
CIS: key demand forecast data
North America: key demand forecast data

South America: key demand forecast data
Brazil is the dominant consumer of iron ore in South America, by some margin
but is only responsible for 2% of global iron ore consumption and sources ore domestically
Middle East: key demand forecast data
Iron ore production and exports by major country
Share of global exports by country
Share of global exports by company
Key demand forecast data
Global consumption of iron ore by product
Growth in iron ore consumption and imports
China key demand data
China's scrap demand in steelmaking
China's steel production by technology
China's iron ore demand changes by ore type
China's blast furnace burden practice
China's hot metal capacity changes by market segment
China's BF capacity expansion and reduction by province 2020-25
Hebei blast furnace units changes by furnace size
Hebei blast furnace capacity changes by furnace size
China's blast furnace units by furnace size
China's hot metal capacity changes by furnace size
China's blast furnace capacity mix by furnace size
Asia (ex-China): key demand forecast data
Pellet charge rates will increase rapidly
pushing up pellet demand to ~150Mt by 2040
Japan is responsible for 5% of global iron ore consumption
and imports 12% of global fines supply
EU28 is responsible for 8% of seaborne iron ore imports
but imports 31% of global pellet imports
Hot metal production declines
as DRI production rises
The Middle East is not a major global iron ore consumer or importer
But is responsible for 19% of seaborne pellet feed imports and 13% of global pellet imports
Iron ore exports by key company
Chinese domestic iron ore production is ramping up
Brazilian supply disruptions 2019 comparison
Price sensitivity to supply is heightened above $70/t CFR China.
Breakeven analysis indicates approximate $10/t price impact from 50Mt "lost" supply.
Global seaborne trade
Seaborne imports of iron ore
Long run supply "gap" analysis
Project incentive curve (basis 62% Fe fines, CFR China)
Incentive price analysis – selected projects