Commodity Market Report

Iron ore markets - long-term outlook - Q3 2020

30 September 2020

Get this report

$5,000

You can pay by card or invoice

Share link

Contact us

Submit your details to receive further information about this report.

First name
Last name
Company
Email
Telephone

Region

Message

Consent

Please keep me informed about Wood Mackenzie products, services and events.

For details on how your data is used and stored, see our Privacy Notice.

- FAQs about online orders
- Find out more about subscriptions

30 September 2020

Iron ore markets - long-term outlook - Q3 2020

Report summary

Forecast revisions result in a tighter seaborne market than previously expected; and as usual, it’s all down to China! An upward adjustment to hot metal production in China, at a time when domestic ore production is close to capacity, feeds through to stronger demand for imported ore. This year’s tightness could persist well into 2021, but as China transitions to less steel intensive growth and the world ex-China remains in recession, we forecast significantly lower prices from 2022/23. The long-term balance between supply and demand is now more closely aligned than previously forecast, but we still expect stagnation or moderate contraction in seaborne trade after 2025. In simple terms, falling Chinese imports will more than offset demand growth in the world ex-China. But this does not mean it’s all over for iron ore. Our price forecast for 2021-25 is $73/t – well below the $90-100/t range achieved in 2019-20 but still an exceptionally high price in relation to production costs.

What’s changed since Q2-2020?
- Price forecast revisions:
- Key risks to our base case view:
Overview
Asia
- China
- 2020 - 2025: Crude steel and hot metal production will peak in 2020
- Iron ore imports won’t peak until 2024
- Iron ore demand from 2025 onward
India
Japan
South Korea
Taiwan
Indonesia and Vietnam
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 risks to the view:
- Key trends by product type
- Sinter fines
- Pellet feed
- Lump
- Pellet
Regional analysis: key changes to our forecast
- Australia
- 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
- Price forecast – the five-year view - what’s changed since Q2-2020?
- Market balance – the five-year view - what’s changed since Q2-2020?
- Long term outlook (no change to price forecast, despite a more closely balanced market).
- Fe grade price spreads (down then up).
- Key "swing factors" that could significantly impact the long-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-2025)
- Methodology
- Long run trade balance
- Long run incentive price
- Australia
- Brazil
- China
- India
- Indian reserves and production
- Key Indian producers
- Indian policy framework
- Africa
- Canada
- Russian Federation/Ukraine/Kazakhstan
- Sweden
- Chile
- Peru
- Dry bulk freight outlook – September 2020

Tables and charts

This report includes 61 images and tables including:

Key demand forecast data
India crude steel production
India iron ore imports

Japan is responsible for 5% of global iron ore consumption
and imports 11% of global fines supply
Indonesia: We expect the relatively rapid increase in iron ore consumption seen over the last five years to continue in the long-term
Vietnam: Strong demand growth to continue but not as rapidly as over the past five years
Europe: key demand forecast data
EU28 is responsible for 6% of seaborne iron ore imports
but imports 26% 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 currently satisfies around one-third of domestic demand but as demand rises that share will fall to around one-quarter
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
Venezuelan iron ore consumption has been all but eradicated by conflict and political instability. Our base case is for a recovery but there is downside risk to this view
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
The DRI sector is the main iron ore consumer in Iran and will increase its proportion of the total in the long-term
Domestic iron ore supply satifies most of Iranian demand. Export volumes will decline in the future
Algeria will import 100% of the pellet feed required to produce DR grade pellets...
...and will be required to import pellet to top-up domestic pellet production to meet demand
DRI is the favoured technology in Egypt
Improved gas availability and lower gas prices will drive higher DRI output
Price forecast revisions
China key demand data
China hot metal production and iron ore imports forecast
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 price levels (Wet tonnes)
Iron ore price forecast revisions
Price forecast and trade balance
Global trade balance
Price and cash cost, by percentile contestable market, CFR China)
Iron ore fines price (real 2020 US$)
Iron ore price and price spreads
Premium and discount for high/low grade iron ore
Iron ore lump premium
Blast furnace pellet premium
Iron ore trade balance
Imports - China down, India up!
Project incentive prices (62% Fe fines equivalent CFR China) (Simandou @12% IRR)
Project incentive prices (62% Fe fines equivalent CFR China) (Simandou @20% IRR)
Incentive price analysis – selected projects
Boxplot: West Australia – China YTD2020 (vs. 2019 average)
Boxplot: Brazil – China YTD2020 (vs. 2019 average)
FOB + Freight (West Australia – China)
FOB + Freight (Brazil – China)
Dated Brent price forecasts and bunker prices YoY % forecasts mix (RHS)
Key iron ore routes forecasts
China - LTO mined iron ore supply
2019 average metallics consumption and ferrous waste generation in China
Demand for iron ore