It’s likely that China will account for the bulk of growth in seaborne iron ore demand, with recession-plagued Europe expected to be steady at best and modest growth likely from the rest of the world.
LONDON (REUTERS) – India is emerging as the unknown factor for Asia’s iron ore market in 2013, which otherwise looks to be in a fair balance between supply and demand.
The key results from a Reuters poll of analysts on Monday showed median forecasts for iron ore prices next year at $120 a tonne and for Chinese import demand to gain 6 percent to 774 million tonnes from an estimated 730 million this year.
The scenario that the poll presents is for solid growth in iron demand from the world’s biggest user and steady prices as well, given Asian spot prices closed Monday at precisely $120 a tonne, near the highest level since late July.
It’s also likely that China will account for the bulk of growth in seaborne iron ore demand, with recession-plagued Europe expected to be steady at best and modest growth likely from the rest of the world.
An increase of 44 million tonnes from China should also be well within the capacity of the main global miners to supply, given what is known of their expansion plans and targets.
The world’s largest iron ore miner, Brazil’s Vale, is expected to produce about 320 million tonnes in 2013, only marginally up from current output levels, which amounted to 317.4 million tonnes in the 12 months to September.
The company expects its expansion projects to start coming on line around the end of next year, but for the most part increases in seaborne iron ore supply will have to come from Australia in 2013.
The bulk of Australia’s increased output will come from world number two producer Rio Tinto, which is expecting to raise production by 33 million tonnes to 283 million.
Third-ranked BHP Billiton said it expects a 5 percent increase in output in the year to end-June 2013 over the same period a year earlier, which if extended over the calendar year could mean about an extra 8 million tonnes.
Fortescue Metals Group has recently scaled back its rapid expansion plans in the face of slower demand growth from China and market unease over its debt-funded model, but even so it may produce an additional 20 million tonnes in 2013.
Taking the three Australians miners together, output may rise in the region of 61 million tonnes, more than enough to meet the forecast growth in China of 44 million.
In fact, it’s enough to suggest that the iron ore market will be in a small surfeit, which in turn suggests limited upside to prices.
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