Australia iron ore, coking coal flows to hold firm: OCE

Market: Coking coal, Metals
19/12/23

Australia will continue to increase its iron ore and coking coal exports out to 2025, according to the government's commodity forecaster, with global steel consumption also rising.

The Office of the Chief Economist (OCE) revised the forecasts of Australian metallurgical coal exports to 174mn t in 2024-25, according to its latest Resources Energy Quarterly (REQ), up from 173mn t in the September REQ. The increased was attributed to higher production in New South Wales and especially Queensland.

A significant change affecting the outlook is a continuing switch to India from China as the largest importer of metallurgical coal, particularly as India's steel making capacity continues to rise. China's met coal imports are likely to ease as domestic demand is affected by weaker steel output and a Chinese government policy mandating production cuts for the third consecutive year to reduce carbon emissions.

Iron ore exports from Australia and Brazil will continue to rise in 2024 and 2025. The OCE revised Australia iron ore shipments to 947mn t by 2025 from the September REQ, as Australia is projected to see a continued production boost from new projects from established producers Rio Tinto, BHP and Fortescue, as well as emerging producers such as Mineral Resources Limited and Atlas Iron.

Global steel production is expected to increase to just under 2bn t by the end of the outlook period to 2025, which will be supported by growth in new capacity from projects in Asia-Pacific, North America, Europe and the Middle East. The OCE also projected global industrial production will recover in 2024 and 2025, with global construction continuing to be driven by infrastructure projects.

The OCE raised its 2023 spot price forecasts for iron ore and coking coal in the December REQ with firmer market sentiment and domestic supply concerns in China. But it increased its 2024 and 2025 price forecasts for iron ore on its expectations of demand outstripping supplies, while cutting coking coal price forecasts during the same outlook period because of more stable supplies and weaker demand.

The Argus ICX iron ore index was last assessed at $134.05/dry metric tonne (dmt) cfr Qingdao on a 62pc Fe basis on 18 December, down from a high of $137.70/dmt on 12 December but increasing from $119.05/dmt on 4 October. Argus assessed the premium hard coking coal price at $316/t fob Australia on 18 December, down from $359.50/t on 4 October.

Australia metallurgical coal forecasts
	2022a	2023e	2024f	2025f
Trade, imports, exports (mn t)

Global trade	312	313	311	318
China imports	64	78	54	55
India imports	58	70	73	73
Japan imports	43	41	41	41
EU imports	36	36	36	36
Australia exports	161	159	173	176
US exports	42	43	42	43
Russia exports	28	28	26	28
Nominal spot prices ($/t)
December 2023 REQ	364	293	219	203
September 2023 REQ	364	264	223	205
December 2022 REQ	377	254	228	N/A
Source: OCE
a=actual, e=estimate, f=forecast

Australia steel, iron ore outlook
	2022a	2023e	2024f	2025f
Steel output, demand (mn t)

Global steel consumption	1,895	1,927	1,962	1,990
China steel output	1,018	1,030	1,022	1,016
Iron ore trade, production, consumption (mn t)
World trade	1,574	1,609	1,635	1,665
China imports	1,108	1,152	1,122	1,094
Japan imports	104	106	108	107
EU imports	114	99	113	114
Australia exports	884	902	917	947
Brazil exports	346	367	390	413
Nominal iron ore pricing ($/t)
December 2023 REQ	103	105	87	77
September 2023 REQ	103	100	84	76
December 2022 REQ	102	85	73	N/A
Source: OCE
a = actual, e = estimated, f = forecast

Iron ore prices ($/dmt)

Australia metallurgical coal prices ($/t)

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