Global iron-ore production will grow modestly from 2.8-billion tonnes this year to 3-billion tonnes by 2028, says macroeconomic and industry research house Fitch Solutions.
This represents an average yearly growth rate of 0.5% during the period, which is a slowdown compared with the average growth rate of 2.9% during 2009 to 2018.
Fitch says iron-ore supply growth will be primarily driven by India and Brazil, while miners in China that operate at the higher end of the iron-ore cost curve will be forced to cut output, owing to falling ore grades.
AUSTRALIA
In Australia, Fitch anticipates that iron-ore production will decline to a yearly 0.6% growth rate between 2019 and 2028, compared with an 11.6% growth rate over the prior ten-year period.
This is owing to junior miners mothballing their mines, while major miners are expected to maintain their production growth targets to crowd out high-cost producers.
Fitch notes that, for example, Rio Tinto in April lowered its 2019 iron-ore production guidance by 14-million tonnes as a result of Cyclone Veronica and a fire at its Cape Lambert port facility, followed by BHP which cut its iron-ore production guidance for 2019 by six- to eight-million tonnes owing to impacts of the same same cyclone.
However, major miners continue to decrease costs and increase production in the longer term in Australia. For example, BHP is developing the South Flank iron-ore project in Western Australia and expects production to start in 2021.
Additionally, Rio Tinto is developing the Koodaideri project in the Pilbara region, in Australia, which is also due to start production in 2021.
Moreover, a Fortescue Metals Group iron-ore mine called Eliwana will come on line in 2020.
BRAZIL
Fitch estimates that Brazil’s iron-ore production will rebound in the coming years, as a result of a solid project pipeline and low operating costs. The research house predicts that Brazil’s iron-ore production will decrease to 443-million tonnes this year, then return to reach 567-million tonnes by 2028, averaging a 1.5% yearly growth rate.
The decrease in production was mainly as a result of Vale’s Brumadinho tailings dam collapse, which led to the decommissioning of remaining tailings dams for three years.
CHINA
Fitch says China's iron-ore production will edge lower over the coming years , as weak prices – the 2019 price rally has peaked – and tightening environmental regulations force higher-cost operations off line.
“We forecast the country's output to decline slightly, from 802-million tonnes in 2019 to 785-million tonnes by 2028.
“China's iron-ore imports will slow down over the coming years, in line with slowing steel production.”
Fitch adds that while it expects the overall volume growth of China's iron-ore imports to decelerate, the country's tightening environmental standards will keep demand for high-grade iron-ore relatively strong, putting a premium on prices.
For example, in September 2017, Chinese officials announced that they would cancel about a third of the country's iron-ore mining licences, mostly belonging to small polluting mines, as part of Beijing 's efforts to improve its air quality. The move affected about 1 000 mines.
INDIA
India’s iron-ore output growth will be supported by the removal of export taxes in the Union Budget for low-grade ores and the country’s Minerals and Minerals Development and Regulation Act, which will streamline licensing and reopen closed mines.
Although the legislation will support ore output growth, the royalties included in the Act will limit the sector’s overall growth potential.
As part of India’s 2016 Union Budget, export duties for iron-ore lumps and fines below 58% iron content were reduced to nil from 30% and 10%, respectively. This reduction was aimed at boosting shipments from the western State of Goa, where the Supreme Court lifted an earlier iron-ore mining ban, Fitch explains.
However, the research house adds that 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 this year rather than increase.
Fitch forecasts India’s iron-ore output will grow from 230-million tonnes this year to 241-million tonnes in 2018, averaging a 2% yearly growth rate during 2019 to 2028, which is better than the 0.9% year-on-year growth recorded over 2009 to 2018.