Commodity Market Report

Iron ore markets - long-term outlook - Q3 2020

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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.

Table of contents

    • Price forecast revisions:
    • Key risks to our base case view:
  • Overview
    • 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
    • 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
    • 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
    • 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

What's included

This report contains:

  • Document

    Iron ore markets - long-term outlook - Q3 2020

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