Australia, the world’s largest iron ore exporter, may ship 13 percent more of the steelmaking material in the 2010 fiscal year as mining companies bet that Chinese demand will recover, according to the Canberra-based Australian Bureau of Agricultural and Resource Economics (Abare).
Abare is looking for a rise in shipments to 337.5 million metric tons in the 12 months ending June 30, 2010, up from 298 million tons a year earlier, it said today, with a further rise of 11 percent the following year, it said.
BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd. are betting on a revival of demand from Chinese mills to sustain production growth, however analysts are looking at a price fall of up to 30 percent, the first decline in seven years.
“It is expected global steel production will experience a relatively quick recovery from the current recession,” Abare said in a report today. “Chinese steel production is expected to increase from 2010 onwards.”
China accounts for almost 50 percent of world iron ore purchases in 2008.
Australia’s iron ore export earnings may drop 20 percent to A$27 billion ($17 billion) in fiscal 2010 and prices may fall for two years because of reduced global demand from steelmakers, Abare said. Coking coal export earnings may also decline 42 percent to A$21 billion.
The bureau expects Chinese steel production to grow by an annual average of 7 percent a year over the next five years. Steel output could rise 3 percent to 517 million metric tons in 2009, it said.
That prediction runs counter to a China Iron and Steel Association forecast on Feb. 13 that production in the country may fall this year. Steelmakers were pinning their hopes on a government stimulus package to revive demand as more than 60 percent of the mills were losing, the association said Feb. 23.
China, producer of one third of the world’s steel, is spending 4 trillion yuan ($585 billion) on the package to boost flagging economic growth.
Global copper consumption may contract for the first time in three years, forcing the average annual price “significantly” lower this year, the bureau said. Copper may average $3,330 a ton, it said, less than half of the previous year. Exports of copper ore and concentrate from Australia are forecast to increase 10 percent in fiscal 2010 to 1.9 million tons, it said.
Aluminium prices will remain “weak” this year and may average $1,400 a ton, the bureau said. Futures closed at $1,318 on March 2 in London. Output cuts by producers, including Rio and Alcoa Inc, may not be enough to stem increases in inventories, the bureau said. Australia’s aluminium export volumes are forecast to fall 3 percent in fiscal 2010 to 1.7 million tons, it said.
Nickel, used to make stainless steel, may average $10,500 a ton in 2009, with demand possibly rebounding in the second half to support a “modest” recovery in pricing, it said. The metal closed at $9,550 a ton on March 2. Nickel exports are forecast to increase 5 percent in fiscal 2010 to 125,000 tons, it said.
Zinc prices may average $1,285 a ton this year, 32 percent lower than last year’s average, as demand continues to be weak, the bureau said. Demand for zinc, which traded at $1,101 a ton on March 2, may begin to rebound next year, it said. Exports of zinc ore and concentrate from Australia are forecast to decline 18 percent in fiscal 2010 to 1.7 million tons, it said.
Source: Bloomberg
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