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Rohin Kumar

@rohinkumar
2 years ago ~910 views
In this thread let us understand what is happening with iron ore. Since Australia is the largest exporter of iron ore, I have sourced the data from official documents released by the Australian govt and major producers of iron ore in Australia. This data is the most credible info one can find on iron ore.

On the supply side Australia is the largest exporter ( exported 872 million tonnes in 2021 ) and on the demand side, China is largest importer ( imports close to 1000 million tonnes every year ). China imports nearly 80% of its iron ore requirement. Out of 872 million tonnes exported by Australia in 2021, 720 million tonnes were exported to China making Australia the biggest supplier of China. Hence, understanding how the Australian govt looks at Chinese demand will provide us with many insights.
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Rohin Kumar

@rohinkumar
2 years ago ~30 views
Before moving onto forecasts made by Australia, it is important to note that weather conditions during Jan-March disrupt activities of miners in both Australia and Brazil which are the top 2 exporters. When you are analysing by yourself do acknowledge that Jan - March data could be an outlier.

Australian govt is projecting an export of 919 million tonnes of iron ore during 2022 at an average price of 110$ per tonne. During 2023, it projects that export prices will drop to 80$ per tonne. Finally it established a price target of 55$ per tonne by 2027 (Remember that these are the estimates prepared by the biggest exporter of iron ore).

Quarterly projections are as follows ➖

1) June ‘22 - 227 million tonnes at 117$ per tonne

2) Sep ‘22 - 234 million tonnes at 105$ per tonne

3) Dec ‘22 - 235 million tonnes at 95$ per tonne

4) March ‘23 - 234 million tonnes at 88$ per tonne
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Rohin Kumar

@rohinkumar
2 years ago ~40 views
How does Australia (Biggest supplier) look at China (Biggest consumer)?

- In the short term, it sees China’s stimulus as a big plus for infra-led steel demand ( China brought down the cash reserve requirement for banks by 0.25% in April and aims to aggressively spend on infra to stimulate its economy ). Aggressive push for infra could be due to the weak housing market in China.

- In the short term, it sees China’s real estate market to be a problem ( falling sales and high-debt taking by builders ). 30% of steel in China is used by builders.

- In the medium term, it sees China’s plans to reduce import dependence as a risk. China, in its 2021-25 raw material development plan has indicated it will significantly reduce its iron ore imports. It aims to achieve this by increasing its domestic output by 100 million tonnes p.a. Additionally it is developing a mine in Simandou, Guinea to source 200million tonnes p.a ( It has commenced building 650km railway network and a port.
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Rohin Kumar

@rohinkumar
2 years ago ~30 views

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Rohin Kumar

@rohinkumar
2 years ago ~290 views
Australians look like they are preparing for lower iron ore prices by increasing their supply capacity. In this way they can offset the damage caused by lower prices by increasing their volume share. Top 3 players Rio Tinto, BHP and Fortescue have all commenced mining from their new mines. Also, the govt in Feb ‘22 has approved the expansion of iron ore handling capacity of Port Hedland ( From 495 million tonnes to 660 million tonnes ). Port Hedland is the port from where most of the iron ore is exported out of Australia.

Overall, from the lens of the largest supplier of iron ore (Australia), it looks like short term demand from China will hold up prices until the next quarter. Thereafter, the largest producer (Australia) is expecting prices to start falling on account of excess supply and it expects the prices to fall gradually until 2027.
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