Australian iron ore

Australia, the biggest seaborne supplier of iron ore at nearly 900mn t/yr, has the scale, but its turn toward supply discipline in recent years and renewed scrutiny over heritage sites are limiting any immediate upside. Producers Fortescue Metals and Roy Hill are pushing hard to maximise output, and majors BHP and Rio Tinto are on pace to meet guidance. Marginal firms are bringing production on line and mining firm Mineral Resources (MinRes) plans to grow to 92mn t/yr over 3-5 years. But most of the new capacity over the next five years is to sustain existing production and "as such, we don't see material incremental supply emerging from Australia in this period," Fortescue chief operating officer Greg Lilleyman said this month.

 

Non-mainstream iron ore

China doubled its imports of non-mainstream ores in 2020 from India, Russia and Chile and increased imports by more than 80pc from Russia and Canada, customs data through October show. Smaller suppliers have also seen strong gains in recent months, traders said. But these gains have been partially offset by a near halt to Indian pellet exports and a 75pc drop in Iranian imports. Europe's price premium is starting to pull Ukrainian supply, lifting import prices for concentrate and lump into China.

 

Chinese domestic iron ore

China's iron ore production will have limited upside because Beijing has discouraged investment in the sector with increased environmental restrictions, higher taxes and longer approval times, speakers at an iron ore conference in Xiamen said this month.

 

Winter will also limit output. China's unprocessed iron ore production fell by 4pc from October to 75.2mn t in November, its national bureau of statistics said. China produces more than 200mn t of iron ore concentrate on a 62pc Fe equivalent basis but estimates vary widely because of the different Fe assumptions for its run-of-mine output.

Ferrous scrap

China's anticipated restart of ferrous scrap imports in early 2021 has reminded iron ore producers that the country plans to shift toward recycling scrap under its next five-year plan and in the longer term, but that shift will be limited in 2021.

 

China's ferrous scrap imports ranged from 2.1mn-2.6mn t/yr in 2014-17 before the country's import ban post-2018. Only 1.34mn of scrap was imported in 2018.

 

China is close to self-sufficiency in terms of scrap supplies as shown by its ability to support a rise in ferrous scrap consumption to a record high of 215.93mn t in 2019 without the need for overseas purchases. Total consumption this year is on track to fall by 1pc, according to the China association of metal scrap utilisation (Camu).

 

Scrap imports are unlikely to eclipse the all-time high of 13.7mn t in 2009 and may not average above 20mn t over the next five years, China-based steel market participants said.