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Commodity Market Report 30 September 2021

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Report summary

Iron ore is at a transition point. The same drivers of rising prices through 2019/20 went into reverse from mid-2021: supply constraints started to ease, but more significantly, the long awaited and much talked about cuts to Chinese steel production started to take effect, reinforcing our view that 2020/21 = peak hot metal production for China. Given China's dominance of global seaborne iron ore demand, the impact on pricing is pronounced. The big hit occurs in 2022: our price forecast has been cut to $90/t CFR. Smaller downward adjustments have been applied for subsequent years with 62% Fe fines forecast to average $72/t CFR (in real terms) between 2023-25. Under a weak demand scenario it is unlikely that prices will fall below $60/t CFR for a protracted period due to cost support around the 90th percentile of the cost curve for contestable supply. Our current assessment of iron ore market dynamics and price outlook to 2035 are presented in this report.

What’s changed since Q2 2021?
- Demand revisions
- Supply revisions
- Price forecast revisions
The five-year view - what’s changed?
- Seaborne Trade
- Price Forecast
Simplified market balance and implied clearing price:
Price versus costs
Premiums and discounts
Price outlook for lump
Price outlook for pellets
- Past trends in pellet premia
- Future tends in pellet premia
The Long-Term Outlook (post-2025)
- Forecasting rationale
- No change to long term price forecast - but potential downside risk post-2035
- Incentive price analysis
- Key swing factors that could impact the long-term view:
Overview
Asia
China
- Steel production up again in 2021 but hot metal production to slow down
- Higher scrap usage to weigh on iron ore demand in the future
- Iron ore imports to decline slower than consumption
India
- Indian integrated steel players to go big on capacity expansions
- Green steel to make inroads but BOF will remain dominant technology in the long term
Japan
South Korea
- Impact of decarbonisation in Japan and South Korea
Taiwan
South East Asia
Other Asia
Europe
EU and the UK
Turkey
CIS
Russia
Ukraine
North America
United States
Mexico
Canada
South America
Brazil
Other South American countries
Australia
Middle East and North Africa
Iran
Algeria
Egypt
Africa
South Africa
Overview
- Key changes to the seaborne supply forecast this quarter:
- Key trends by product type
- Sinter fines
- Pellet feed
- Lump
- Pellet
Regional analysis: key changes to the forecast
- Brazil
- Chile
- Peru
- Canada
- United States
- Liberia
- Mauritania
- Sierra Leone
- Guinea
- South Africa
- Europe
- Russia
- Ukraine
- Kazakhstan
- China
- India
- Asia (excluding China and India)
- Iran
- Iron Ore Definitions and Value Chain
- Characteristics of Saleable Iron Ore Products
- Iron Ore Value Chain
- Australia
- Brazil
- China
- India
- Indian reserves and production
- Key Indian producers
- Indian policy framework
- Africa
- Canada
- Russian Federation/Ukraine/Kazakhstan
- Sweden
- Chile
- Peru
- Introduction:
- Methodology:

Tables and charts

This report includes 59 images and tables including:

Tier 3 and Chinese domestic supply requirement
Implied iron ore price 2022 and 2023
Price and cash cost, by percentile contestable market, CFR China)

Premium and discount for high/low grade iron ore (%)
Premium and discount for high/low grade iron ore (US$/t)
Iron ore lump premium
Key demand forecast data
China key demand data
Lower Japanese demand will drive lower consumption in JKT
Korean iron ore demand will overtake Japan by 2035
South East Asia iron ore consumption
Indonesia's and Vietnam's share of iron ore consumption to rise over time
Europe: key demand forecast data
EU+UK is responsible for 8% of imports
but imports 32% of global pellet imports
Turkish blast furnace iron ore consumption has the potential to grow in the medium term as new hot metal producing assets are commissioned
Turkish domestic iron ore supply satisfies around one-third of domestic demand but as demand rises that share will fall to one-quarter
Key demand forecast data
North America: key demand forecast data
Blast furnace closures will hurt Canadian iron ore consumption
Canada produces pellets and is a major exporter of pellets and pellet feed.
South America: key demand forecast data
Brazil is the dominant consumer of iron ore in South America
Venezuelan iron ore consumption has been decimated by the economic collapse. We forecast a recovery but only in the long term
Middle East and North Africa: key demand forecast data
Iran DRI and hot metal production
Iran iron ore consumption by product
Egypt and Algeria iron ore consumption
Egypt and Algeria DRI production
Iron ore price forecast
Price forecast revision: the five-year view
Blast furnace pellet premium
Iron ore price forecast (a long-term perspective)
Incentive price analysis – selected projects
'Project incentive prices (62% Fe fines equivalent CFR China) (Simandou @12% IRR)
'Project incentive prices (62% Fe fines equivalent CFR China) (Simandou @20% IRR)
China hot metal production and iron ore imports
BOF and EAF production forecast
Long-term China iron ore forecast
Asia (ex-China): key demand forecast data
Capacity additions by large Indian steelmakers
India crude steel production
India iron ore market
India iron production
India iron ore consumption by product
Iron ore production and exports by major country
Iron ore exports by key company
China: domestic iron ore supply forecast revisions
Contestable Private Production at different price levels (Wet tonnes)
India mine capacity additions
India iron ore and pellet production
Iron ore grade comparison
Figure 1 Iron ore size depictions depicts lump ore, sinter feed, and pellet feed for visual reference.
Figure 2. The Iron Ore Value Chain
Figure 3. Agglomerated products
Figure 4. The blast furnace / basic oxygen furnace method (BF-BOF)
Figure 5. Direct-reduced iron / electric arc furnace method (DRI/EAF)
Simplified iron ore global balance
Tier 3 and Chinese domestic supply requirement and price forecast