Singapore — The office of Australia's chief economist has trimmed its 2018 forecastsfor the country's iron ore export volumes and prices, the latest edition ofthe Resources and Energy Quarterly report released Monday showed.
It is now expecting the country to ship 860 million mt of iron ore thisyear, down from the 874 million mt forecast it gave in the January-Marchreport.
The forecast for 2018 from the Canberra-based unit is up from anestimated 827 million mt of iron ore exported in 2017. Iron ore exports areexpected to grow in 2019 and 2020 to 880 million mt and 891 million mt,respectively. The forecasts for 2019 and 2020 are unchanged from the one givenearlier in the year.
"Australia's iron ore export volumes grew by 3.4% to 199 million mt inthe March 2018 quarter. Growth was led by productivity improvements at RioTinto's Pilbara operations, and the ramp up of its recently commissionedSilvergrass iron ore mine, as well as improved rail performance at BHP'soperations," the report said.
While productivity improvements and replacement mines at Rio Tinto andBHP's operations "as they attempt to reach their long-term production targets"as well as the commissioning and ramp up of some smaller projects, includingMount Gibson's Koolan Island are expected to drive volume increases, some ofthat will be partly offset by the closure of some mines due to depletion, itsaid.
The report also noted BHP's production guidance downgrade of 4.5 millionmt to 237 million mt, which it announced in its January-March quarterlyreport, because of train reliability issues.
Meanwhile, the report said FOB Australian iron ore is forecast to average$59.40/mt this year, which is down 4% from the outlook it gave in the Marchreport of $61.80/mt, it said.
The forecast for 2018 is down from an estimated $65.50/mt last year andit's expected to slide to $50/mt in 2019, and then to $49/mt in 2020, thereport added.
While high steel prices, a positive outlook for industrial production anda seasonal rebound in construction activity in China's spring months are allexpected to provide some price support this year, it is expected to decline in2019 and 2020 as a result of moderating demand and growing supply,particularly from Brazil. China's steel production is also projected todecline with ongoing capacity reductions and policies to address airpollution.
The report forecasts Brazil's iron ore exports to climb from 384 millionmt in 2017, to 437 million mt in 2020.
Meanwhile, China's imports of the steel making ingredient are expected tofall from 1,075 million mt in 2017, to 1,068 million mt in 2020, after hitting1,093 million mt for 2018.
"The effect of declining steel production on iron ore imports is expectedto be partially offset by a projected decline in China's iron ore production.China's iron ore reserves are largely low grade, with an average iron contentof around 30% compared to the benchmark of 62%," the report said.
It also noted an expected switch to India becoming a net importer of ironore next year.
"India's iron ore production is forecast to decline to 175 million mt in2018. The decline will be driven by the cancellation of mining permits(representing 20 million mt of predominantly low-grade iron ore, mostlyexported to China) in Goa, due to renewal issues," it said.
"India's iron ore production is forecast to reach 197 million mt in 2020,underpinned by rapidly growing demand from the domestic steel industry," itadded.
