Australian Govt sees iron ore price at around $100/t in CY'23

Australia's Department of Industry, Innovation and Science predicts that the spot price of 62% Fe grade iron ore will average US$100/tonne (FOB, Australia basis) in 2023, after ore prices performed more strongly in the first quarter, according to its latest Resources and Energy Quarterly report.

For Q1 2023, spot iron ore prices rebounded significantly after tumbling more than 50% in the second half of last year, according to the report. For example, China, the country accounting for 60% of global iron ore demand, saw the price for 62% Fe grade iron ore recover to $115/t in Q1 from last November's $85/t (both for CFR Qingdao).

The growth in ore prices was mainly due to a partial uptick in China's steel production and a bullish outlook for a steel demand recovery this year - with Beijing relaxing its zero-COVID policy and the central government's increasing efforts to boost the domestic economy, the report pointed out.

Indeed, China's iron ore demand - as determined by steel production - will benefit from the country's infrastructure growth this year, as "the (public works) sector is expected to be a significant driver of construction activity in China," the report said, citing the Yuan 4.76 trillion ($680 billion) in local government special purpose bonds that were issued last year.

Nevertheless, the outlook for steel and iron ore demand from China's property sector remains subdued, despite Beijing's intensive policy support. At the end of 2022, property sector investment and new home sales had declined by around 8% and 25% respectively on year, the report highlighted.

On a global level, iron ore demand will be constrained by a global economic slowdown which will weaken conditions in the steelmaking sector, the report said.

Longer term, the report predicted that the average spot price for 62% Fe grade iron ore will drop further, reaching around U$80/t and US$72/t (FOB, Australia basis) respectively in 2024 and 2025.

"Global supply is expected to grow by 3.1% annually over the outlook period to 2028, with new supply coming online in Australia, Brazil and Africa over that time," it said.

On the other hand, within the next few years China will achieve its aim of reaching peak steel output by 2030, indicating a lower iron ore demand.

Also, China's property sector will continue to diminish the country's near-term steel demand, when the sector gradually loses the strength it had enjoyed previously that was generated by "a demographic dividend", it noted.

China is now confronting falls in both its total population and its workforce, with the country in 2022 posting its first decline in population in more than six decades, the report explained.

Written by Lea Li, liye@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.