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What’s next for Australian iron ore?

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Demand for Australian iron ore is set to boom over the next decade, but the overall outlook may be more complicated than a simple upward swing.

The Federal Government’s ‘Resources and Energy Quarterly’ (REQ) for March 2024 revealed strengthened iron ore prices in early 2024 thanks to stimulus policies in China bolstering its economy and shoring up hunger for the steelmaking ingredient.

Prices hovered around $US125 per tonne (t) in January and February, a marked improvement from a previous $US98/t slump in mid-2023.

But a swift fall to seven-month lows in March reflected rising concerns about a rapid build-up of Chinese iron ore inventories amid sluggish growth in steel output in early 2024.

Despite recording flat steel production in 2023, China’s iron ore imports grew by 6.6 per cent to a record 1.18 billion tonnes in 2023, with Australian exports of iron ore to China rising by 1.5 per cent.

Overall export volumes of Australian iron ore increased by 1.1 per cent on the previous year to 893 million tonnes in 2023.

This follows the ongoing ramp up of operations like BHP’s South Flank, Rio Tinto’s Gudai-Darri and Fortescue’s Eliwana.

As additional greenfield supply comes online from established and emerging producers like Mineral Resources’ Onslow project, Australian export volumes are forecast to increase by 1.6 per cent annually through to 2029.

While exports will continue to rise, the REQ warned lower prices on the horizon could curb Australia’s export earnings.

Iron ore exports are tipped to rise to $136 billion in the 2023–24 financial year (FY24), before dropping to $107 billion in FY25 and $83 billion by FY29.

While prices may be softening, the REQ found iron ore demand will only increase in key jurisdictions across the world. Europe, North America, East Asia and South-East Asia will continue to drive iron ore consumption.

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