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

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.

Iron ore prices ($/dmt)

Australia metallurgical coal prices ($/t)