According to the Australian Department of Industry, Innovation and Science expectations, the spot price of 62% iron ore fines is projected to average around $98 per tonne (FOB Australia) for calendar year 2023.
According to the report, there are risks to the recovery in global demand for iron ore, and these risks are decreasing. The report suggests that a more significant slowdown in the global economy could result in deteriorating conditions in the steel industry, which in turn could impact the demand for iron ore.
For example, as stated in the report, China, which represents approximately 60% of global iron ore demand, has exhibited a slower recovery in steel consumption this year compared to market expectations.
After China announced a comprehensive policy in November to stimulate the real estate market and subsequently lifted the measures implemented to curb the spread of COVID-19 the following month, market experts anticipated a broader economic recovery and an upturn in steel consumption. However, up until now, the overall performance of the economy, including the real estate sector, has been rather disappointing.
For instance, the National Bureau of Statistics reports that the total area of newly launched real estate projects in China during the first five months of this year experienced a significant decline of 22.6% compared to the same period from January to April.
In its quarterly report, the ministry stated that iron ore prices have already witnessed a decline from the previous quarter in the April-June period. This drop can be attributed, at least in part, to the slower-than-expected recovery of the Chinese economy and housing sector.
According to the ministry's report, it predicts that global iron ore prices will experience a gradual decline in the long term, reaching an average of US $74/tonne FOB by 2025. This projection is primarily attributed to the slowdown in infrastructure construction.
Meanwhile, the report also indicated that Australia and Brazil, the world's largest iron ore producers, are set to increase their iron ore exports in the upcoming years. This expansion is a result of new projects being launched in both countries.
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