As iron ore prices ease, Australia’s export earnings are forecast to fall to A$113 billion by 2022-23, according to the quarterly outlook report by the Australian government’s department of Industry, Innovation and Science. Australia’s iron ore exports rose from a value of A$103 billion in 2019-20 to A$149 billion in 2020-21 due to record prices and growing volumes.
Iron ore export volumes from the country are expected to grow steadily from 871 million mt in 2020-21 to 954 million mt by 2022-23, as a result of the commencement of several new mines in Western Australia.
According to the report, iron ore prices surged to record highs in 2021, reaching $238/mt in early May. The continuing rebound in economic activity in China and other advanced economies has led to elevated demand for steel and consumption goods, in the midst of the ongoing tightness in global iron ore supply.
The recovery in steel output in China is expected to continue in the coming months, bringing greater supply to the market. This should put further downward pressure on steel prices and the margins of Chinese steel mills, leading to a softening in iron ore prices. It is also expected that China’s strong demand for steel will decrease in the second half this year. According to the report, any disruptions to iron ore imports from Australia could add to current upward price pressures. The sources of tight global supply in iron ore are expected to ease throughout 2021. Heavy rains, which disrupt operations in Brazil, and cyclonic activity which periodically affects Australian shipments, present risks to growing global supply. Australian producers have concerns regarding both factors having the potential to prolong the current upswing in prices through the second half of 2021.
Iron ore prices are forecast to be around $150/mt in 2021, before falling to below $100/mt by the end of 2022, as Brazilian supply recovers and Chinese steel production softens.