Global iron ore production growth will accelerate in the coming years, bringing an end to the stagnation that has persisted since ore prices hit a decade-low of $55 per tonne on average in 2015, Fitch Solutions said in its report.
“We forecast global mine output growth to average 3.6 percent over 2021-2025 compared to -2.3 percent over the previous five years. This would lift annual production by 571 million tonne in 2025 compared to 2020 levels, roughly the equivalent of India and Brazil’s combined 2020 output,” said the report.
Supply growth will be primarily driven by Brazil and Australia. Brazilian miner Vale has aggressive expansion plans, while miners in Australia including BHP Billiton, Rio Tinto and Fortescue will re-invest currently buoyant profits into additional production.
In China, iron ore production will rise once again in the next 3-4 years as the country works to increase its self-sufficiency and reduce Australian imports, having declined significantly over recent years.
Nonetheless, as China’s miners operate at the higher end of the iron ore cost curve and domestic ore grades will continue to decline, Fitch Solutions expect Chinese firms to prioritise investment in overseas iron ore mines, such as the enormous SImandou deposit in Guinea.
Looking beyond 2025, the agency expects that lower prices will eventually drag on production growth rates.
“We forecast annual production growth to average just 1.1 percent over 2026-2030, with output levels stagnating by the end of the decade,” said Fitch Solutions.
Fitch Solutions sees India’s iron ore output growth supported by the removal of export taxes in the Union Budget for low-grade ores and the country’s Mines & Minerals (Development & Regulation) (MMDR) Act, to streamline licensing and reopen closed mines.
Although the MMDR Act will support ore output growth, the royalties included in the Act will limit the sector’s overall growth potential, it said.
As part of India’s 2016 Union Budget, export duties for iron ore lumps and fines below 58 percent Fe content were reduced to nil from 30 percent and 10 percent respectively.
This reduction was aimed at boosting shipments from Goa where the Supreme Court lifted an earlier iron ore mining ban. However, the decision by India’s top court to cancel all iron ore permits in Goa in February 2018 will mean that production from that state is likely to head lower rather than increase. As a result, we forecast India’s iron ore output to grow from 174 million tonne in 2020 to 194 million tonne in 2030, with annual output growth averaging 1.1 percent over the period, it said.