No iron awe: A curious quarterly perspective

Iron ore prices have been volatile in 2024.

Reports suggest that across the board marginal players are in survival mode and they may remain there for some time.

Future export earnings are set to fall amid declining prices although Australian export volumes are rising with further greenfield supply on the cards. 

Last year, exploration fell from near decade highs following a period of growth that was triggered by the historical high prices of above US$200 a tonne in H1 2021. A total of $171 million was spent on iron ore exploration in Q4 2023 in Australia, 13% lower compared to Q3 2023 and 2.2% lower than the same period in 2022. 

Risks to the global iron ore demand outlook, however, remain broadly balanced despite this and the declines in prices and China’s portside iron ore inventories. Inflation is now moderating in most advanced economies with market expectations of interest rate cuts by year-end. 

​​Australia’s iron ore export earnings were $136 billion in 2023 – a 9.5% increase from 2022. In volume terms the country exported 893 million tonnes in 2023, which is up by 1.1%. Keeping in mind exploration spend is down year-on-year.

In terms of pricing, the rally through Q4 2023 and early 2024 came despite weakness in Chinese steel production, which was 13.5% lower and 6.9% year-on-year in December and January respectively. 

In mid-November, China’s portside iron ore inventories fell to about 20% below historic averages. Inventories have reportedly since rebuilt to levels about the historic average as mills were restocked. 

Since then prices for the bulk commodity have plummeted sharply.

Mt Bevan Iron Ore

Nerves of steel

To start 2024, spot prices for the steelmaking material strengthened after steady rises in H2 2023 were driven by positive sentiment associated with the policy stimulus provided to the Chinese economy. 

Prices then fell to seven-month lows in March reflecting mounting concerns about a rapid build-up of Chinese iron ore inventories amidst sluggish growth in steel output early in the year. 

On 1 April 2024, iron ore futures in Singapore plummeted 4.3% to $US96.70 a tonne to a 10-month low and adding to its steep decline from more than $US130 in January.

In its Resources and energy quarterly: March 2024 report, the Department of Industry, Science and Resources (DISR) projects sustained lower prices will result in Australia’s iron ore export earnings shrinking from $136 billion in 2023–24 to $107 billion in 2024–25, and then to $83 billion by 2028–29. 

Given that the steel demand outlook in China is still closely tied to the uncertainty surrounding the property sector’s health and considering the anticipated stable performance from the major seaborne suppliers, Wood Mackenzie anticipates a slight loosening of the market balance in 2024 compared to the last few years. 

Wood Mackenzie’s view is that the price for 62% Fe fines CFR China is poised to average around US$110/t in 2024 and US$100/t in 2025. 

The data and analytics firm explains it like this: “There is no change to our view that prices will trend lower over the next five years in anticipation of easing supply constraints and moderation in Chinese demand.

We maintain our long-term price at US$75/t (real 2024 terms). This report presents our current assessment of iron ore market dynamics and long-term price outlook.”

Combined shipments from Australia, Brazil, South Africa, and Canada — representing more than 80% of global seaborne supply — were estimated at around 1.37 billion tonnes in 2023, a rise of 2.6% from 2022. 

Over the outlook period, DISR reports global trade is expected to grow by 2.1% annually, with new supply coming online in Australia, Brazil and Africa. 

Australia is projected to continue to ramp up greenfield projects from established producers Rio Tinto (ASX:RIO), BHP (ASX:BHP), and Fortescue (ASX:FMG), as well as emerging producers. 

Meanwhile, DISR says Australia’s iron ore exports are projected to reach 983 million tonnes by 2029. Total iron ore shipments from Brazil increased by 21 million tonnes in 2023. 

Brazil is expected to grow iron ore exports by around 6% annually over the outlook period. 

Outside of Australia and Brazil, iron ore exports are projected to be bolstered by additional supply from Canada and India and new projects coming out of Africa, including the 150Mtpa Simandou mine in Guinea, which is targeting first production in 2025 or 2026.

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Images: Fortescue
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.