Industrial metals: More supply of iron ore, but also higher demand

The Australian Department of Industry, Science, Energy and Mining recently released its new quarterly report on the most important commodities for Australia. The most important of all is iron ore. According to the ministry, Australia, as the world's largest producer, exported 868 million tons of iron ore last year, a record amount. This year, exports are expected to expand 3.3% to 897 million tons. Brazil, the world's No. 2 exporter, exported 341 million tons of iron ore last year. Production, and therefore exports, were still under the impact of the dam burst in early 2019 and the Corona pandemic. According to the ministry's assessment, this dip will be ironed out in the current year: Brazilian iron ore exports are expected to reach their pre-crisis level of 396 million tons (+16% year-on-year).

The ministry has also published longer-term forecasts. According to this, Australia will set new records for iron ore exports every year until 2026 (the end of the forecast horizon). In 2025, the sound barrier of 1 billion tons is expected to be broken for the first time. Brazil is also expected to further increase exports, reaching a plateau of around 460 million tons in 2024. New iron ore mines are being commissioned and existing ones expanded in both countries. The additional supply will meet robust demand, particularly from China. The Australian ministry expects Chinese iron ore imports to increase by 8.4% to 1.27 billion tons this year. Thereafter they are expected to level off at around 1.3 billion tons per year. The ministry also assumes stronger demand and thus higher imports for Japan, South Korea and India. India is expected to change from a net exporter to a net importer of iron ore. In our view, the increasing supply from Australia and Brazil should prevent further significant price increases, but robust demand should prevent a price slide.

Source: Commerzbank Research, Photo: Fotolia