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Commodity Market Report

Iron ore markets - long-term outlook - Q1 2021

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30 March 2021

Iron ore markets - long-term outlook - Q1 2021

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.

Table of contents

  • What’s changed since Q4-2020?
  • Price forecast revisions
  • Key risks to our base case view:
    • Seaborne Trade
    • Price Forecast
  • Simplified market balance and implied clearing price:
  • Price versus costs
  • Premiums and discounts
  • Price outlook for lump
    • Past trends in pellet premia
    • Future tends in pellet premia
    • Forecasting rationale
    • What’s changed?
    • Incentive price analysis
    • Key swing factors that could impact the long-term view:
  • Overview
  • Asia
    • 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
    • Key changes to the seaborne supply forecast this quarter:
    • Key trends by product type
    • Sinter fines
    • Pellet feed
    • Lump
    • Pellet
    • 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)

What's included

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    Iron ore markets - long-term outlook - Q1 2021

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