World economic growth is very important for the resource market. This is what drives demand for all the metals and mines discussed here at Mining.com.au.
That’s why the latest World Economic Outlook update from the International Monetary Fund (IMF) is so encouraging.
Global growth should be 3% in 2026 and 3.7% in 2027.
That’s good to remember while reading all the current headlines about Iran and Ukraine.
Yes — the oil price is elevated. But it’s not a killer for the world economy while both Ukraine and Iran remain in regional conflicts.
Consider this quote from the legendary Ken Fisher back in April:
“Oil was over US$75 [$114] a barrel for almost all of 2023. Global GDP was fine and global stocks rose over 22%. In the early 2010s, economies and stocks grew for years with US$100 oil. With about 45% inflation since then, US$100 oil now is equal to US$65 oil then.”
One thing is also clear. When it comes to commodities, it’s Asia that still drives most of that demand. Read: China and India.
That too is something of a paradox. For years Australian investors have been told China’s economy is weak and its property market is falling.
And yet the iron ore price, as one example, still remains above the previous consensus view.
That’s certainly not all.
BreakWave Advisors recently posted, in part:
“China remains the world’s largest consumer of industrial raw materials, accounting for roughly three-quarters of global seaborne iron ore trade while underpinning demand for coal, bauxite, and other bulk commodities.
“Although the property sector remains weak, infrastructure spending, manufacturing, and export-oriented industries continue to support raw material imports at historically elevated levels.
“India, by contrast, continues to provide the strongest incremental growth story. With GDP forecast to expand by 6.4%, rapid urbanisation, infrastructure development, and resilient domestic demand are driving higher imports of coal, fertilisers, and steelmaking raw materials.
“While China remains the dominant source of demand in absolute terms, India is increasingly emerging as the marginal growth engine for global dry bulk trade.”
We can see the influence of India in the natural resource market this month, with the Australian commitment to sell uranium during the tour of Indian Prime Minister Narendra Modi.
But India will call on Australian iron ore and coking coal too — perhaps more so with the Strait of Hormuz and Russia both under pressure.
Iron ore is not generally considered a ‘growth’ story anymore. That view may be wrong.
Market commentator Carl Capolingua recently reported:
“Rio Tinto’s iron ore chief Matt Holcz told the Australian Financial Review Mining Summit in Perth in late May — after Simandou’s April production data was released — ‘the demise of the iron ore price has been greatly exaggerated over recent years’. His argument is one of scale: the seaborne market needs to replace roughly 800 million tonnes of ageing production over the next decade.”
Perhaps also of note is that the Vanguard Group announced to the market that it’s a significant shareholder in ASX-listed iron ore producer Champion Iron (ASX:CIA) this week.
Mining.com.au also reported on iron ore producer Fenix Resources (ASX:FEX) building cash in the current market.
There are not many prospective development iron ore projects. One that can stake a claim is Hawsons Iron (ASX:HIO). It recently released its updated Prefeasibility Study.
HIO aims to produce high-grade iron ore to serve the evolving ‘green steel’ market developing in major producer China to reduce its emissions.
The project still needs a substantial sum in terms of finance. Hawsons notified the market in May that a German trade bank had submitted an expression of interest for debt funding as part of the capital requirement.
Hawsons’ Managing Director Tom Revy said at the time:
“The expression of interest from KfW IPEX-Bank is an important milestone in the advancement of the company’s financing strategy. It highlights increasing international lender confidence in the Hawsons Iron Project and positions the company strongly as we progress funding discussions with strategic partners.”
If world growth continues on its current trend, then it’s reasonable that more than one Australian iron ore project is going to need financing and capital market backing.
Iron ore reserves continue to run down and have for years.
Write to Callum Newman at Mining.com.au
Images: Unsplash
