Global iron ore market will stay oversupplied

Subject

Developments in the global iron ore market

Significance

In 2015, China's iron ore demand fell by 3.5% to 691 million tonnes (mt), contributing to a 40% drop in the commodity price. Spurred by Beijing's recent stimulus measures, prices have rebounded by 23% in 2016 thus far, triggering a surge in orders for basic construction materials (steel output reached a record 70.6 mt in March). Holdings of ore at China's ports have increased by 2.3% year-to-date, peaking at 97 mt on April 20, their highest level in a year.

Impacts

• Global iron ore demand is projected to return to growth of 2% in 2017-19, but its increase will be outpaced by stronger supply growth.
• Oversupply will rise to 38 mt in 2017, before falling to 14mt in 2018, according to the World Steel Association.
• Backed by South Korea's POSCO, Australia's Roy Hill will increase production, adding 55 mt to global supply by early 2017.
• Iran will add 2.5 mt to annual pellet production this year and a further 15.6 mt in 2017.
• India is likely to scrap the 10% export duty on iron ore to bolster miners' position in global markets.