According to a recent analysis of industry trends by Fitch Solutions, global iron ore production will increase slightly in the coming years due to expansion of mines in Brazil and increase in production from India.
Meanwhile, production growth in China will decline amid falling ore grades and high production costs, analysts say.
Global iron ore production will increase moderately from 2,850 million tons in 2019 to 3,119 million tons in 2028, which means an average annual growth of 0.9% in 2019-2028, which is a significant slowdown compared with an average growth of 2.9% in 2009-2018, predicts Fitch.
The increase in supply will be mainly driven by India and Brazil, where Vale intends to expand production through its new mine. Fitch argues that Vale's offer will continue to dominate global production. On the other hand, miners in China who operate at a higher final cost of iron ore will be forced to reduce production due to a drop in ore content.
Fitch has revised its forecast for Australian iron ore production in 2019 downward from 903.6 million tons to 882 million tons due to Veronica cyclone and other operational difficulties affecting production at major mines.
Analysts expect Australia’s iron ore production to grow at a minimum over 2019–2028, with an average annual growth of 0.4%, compared with a 10.4% increase over the previous 10 year period, due to mines conservation mining miners, while the main players will adhere to their production growth is aimed at crowding out expensive producers.
In April 2019, Rio Tinto lowered its iron ore production forecast for 2019 by 14 million tons due to a Veronica cyclone and a fire at its port facility in Cape Lambert, after which BHP reduced its iron ore production forecast for 2019 from due to the impact of tropical cyclone Veronica at 6.0-8.0 million, according to Fitch. And in June 2019, BHP announced a return to full production capacity at its Western Australia Iron Ore Mines (WAIO), reflecting a 12% increase over March 2019.
Fitch expects Brazil's iron ore production growth to recover in the coming years after 2019 due to low operating costs and a robust project. Brazil will benefit from the production of high-quality iron ore, which is becoming increasingly popular among Chinese steel producers.
Fitch predicts that iron ore production in Brazil will decline to 443 million tons in 2019, and then return to growth, reaching 567 million tons by 2028, averaging 1.5% of total annual growth.
