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Commodity Market Report 30 March 2021

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Report summary

Good times continue for iron ore miners, with global average cash margins estimated at 75%. This is higher than the industry achieved during the last great iron ore boom of 2010-2013 and is being supported by China's insatiable demand for steel and constraints on seaborne supply. Forecast revisions with this quarterly update result in a tighter seaborne market than previously expected. We now believe the positive flow through from 2020 could last for several years as the supply side struggles to catch up with buoyant demand. We have raised our medium term price forecast by approximately 25% and our longer term forecast by 6-8%. The long run (mid-cycle) price forecast for 62% Fe sinter fines is now $70/t CFR (real terms); consistent with long run marginal costs and project incentive price analysis. In this report and downloadable content, we provide an update on how the latest market developments will shape the long-term outlook for iron ore.

What’s changed since Q4-2020?
Price forecast revisions
Key risks to our base case view:
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
- What’s changed?
- Incentive price analysis
- Key swing factors that could impact the long-term view:
Overview
Asia
China
- Strong start to 2021 steel and hot metal production
- Steel and hot metal production peak expected this year
- Iron ore imports peak in 2023
- Iron ore demand from 2025 onward
India
Japan
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 our forecast
- Brazil
- Chile
- Peru
- Venezuela
- Canada
- United States
- Liberia
- Mauritania
- Sierra Leone
- Guinea
- South Africa
- Europe
- Russia
- Ukraine
- Kazakhstan
- China
- India
- Asia (excluding China and India)
- Iran
- 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:
- Dry bulk freight outlook – March 2021

Tables and charts

This report includes 61 images and tables including:

Price forecast revisions (2015-2025)
Price forecast revisions (2000-2025)
Base case: tier 3 requirement

High case: tier 3 requirement
Base case: implied price
High case: implied price
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
India crude steel production
India iron ore imports
Decline in Japanese imports will not be fully offset by growth in Korea
Japan and Korea to consume equal volumes of iron ore by 2040
South East Asia: Iron ore consumption
Iron ore consumption: Share of Indonesia to increase
Europe: key demand forecast data
EU28 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
Canadian iron ore consumption will be between 10-11Mpta to 2040.
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, but is only responsible for 2% of global iron ore consumption.
Venezuelan iron ore consumption has been decimated by the economic collapse. We forecast a recovery but risk is negative.
Middle East and North Africa: key demand forecast data
The Middle East is not a major global iron ore consumer or importer
But is responsible for 10% of seaborne pellet feed imports and 13% of global pellet imports
DRI is the main iron ore consumer in Iran and will increase its share in the long-term
Iran iron ore consumption by product pellet dominates!
Egypt and Algeria iron ore consumption
Egypt and Algeria DRI production
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)
China hot metal production and iron ore imports
BOF and EAF production forecast
Long-term China iron ore forecast (Dry basis, 62% Fe equivalent)
Asia (ex-China): key demand forecast data
Global export forecast
Iron ore production and exports by major country
Iron ore exports by key company
Global exports by product type
China: domestic iron ore supply forecast revisions
Contestable Private Production at different prices
Implied Global Balance
Cash cost curve
West. Australia - North China freight rate
Tubarao – Qingdao freight rate
FOB + Freight (West Australia – China)
FOB + Freight (Brazil – China)
Dated Brent price forecasts and bunker prices YoY % forecasts mix (RHS)
Key iron ore routes freight forecasts (rates in US$/t)