Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Australia’s iron ore exports in 2021 could decline by 5pc to $97bn from a record high of $102bn in 2020, before falling further to $80bn in 2022 due to falling prices according to Australia’s Resource and Energy Quarterly.

 

The benchmark prices for 62pc Fe fines are forecast at $100/mt cfr in late Q4 2020, $93/mt cfr by Q2 2021, and a gradual decline reaching $85/mt cfr in June 2021. By the end of 2021, they could fall to $80/mt cfr, and to $75/mt cfr by the end of 2022 after the spike of near $130/mt cfr Tianjin port in recent weeks the Australian forecast noted.

 

Iron ore export volumes from Australia, however, will grow by 5pc to 905mn mt by 2022 from 860mn mt this year, the forecast predicted. The outlook reflects the International Monetary Fund’s (IMF) forecast of a world contraction of 4.9pc in 2020 but growth of 5.4pc in 2021. 

 

World steel consumption is expected to fall by 6.1pc in 2020 but grow by 4.2pc in 2021 and 4pc in 2022. World steel production will fall by 4pc in 2020 before increasing by 4.5pc in 2021 and 4pc in 2022.

 

The Australian forecast predicts the country’s earnings from iron ore to remain strong throughout next year due to high demand from China and the expectation of continued disruptions in Brazil’s supply chain. Brazil’s new supply growth expectations are also limited due to COVID-19 issues in-country as well as stronger scrutiny of mining developments by the legislature on ongoing environmental and safety concerns. 

 

Brazilian iron ore production is expected to return to normal levels by late 2022 with export volumes projected to grow by slightly over 4pc to 380mn mt in 2022 compared with 2020.

 

New technology metals essential for renewable energy, electric vehicles, and batteries such as lithium, nickel, and zinc are expected to grow in output and demand. Copper and nickel prices are already achieving pre-COVID-19 levels. Thermal and metallurgical coal and oil exports could remain subdued to the end of this year.

 

The expectation of strong prices in core minerals such as iron ore is supporting new investment plans in Australia. Previously shut down sites are re-opening, other existing sites reviewed, and new projects are under evaluation for final investment scope.

 

Overall, Australia’s resource and energy export earnings will decline by 11.7pc to $256bn in 2021 from $290bn this year. The forecast declined marginally from June as a result of ongoing uncertainty from COVID-19. Exports in 2022 could decline by 1.5pc to $252bn compared with 2021.

 

The top five major markets for Australia’s resource and energy exports in 2020 have been China at $127bn (43.8pc), Japan at $46bn (15.9pc), South Korea at $21bn (7.2pc), Taiwan at $15bn (5.2pc), and India at $9bn (4.3pc).

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