Australia lifts 2016 iron ore price forecast by 11%

[SYDNEY] Australia lifted its 2016 price forecast for the country's biggest export earner iron ore by 11 per cent on Friday, though kept it well under current market prices.

The department now sees iron ore averaging US$45 a tonne this year versus a December forecast of US$40.40. "While global iron ore demand is projected to remain relatively flat, continued displacement of domestically produced iron ore in China with seaborne iron ore is expected to result in a modest increase in international trade," Australia's Department of Industry, Innovation and Science said in its latest quarterly commodities paper.

Iron ore stood at US$53.80 a tonne, according to the latest quote from The Steel Index, following a 24 per cent gain between January and March. "While prices briefly rebounded to US$61 a tonne in early 2016, increasing global supply coupled with lower demand from China's steel sector is forecast to result in prices softening by end of the year to average US$45 a tonne in 2016," the department said.

It revised lower its price forecasts for metallurgical coal to US$82.80 from US$83.80 a tonne, while maintaining its thermal coal forecast at US$59 a tonne. Coal is Australia's second-most valuable export-earning commodity after iron ore.

The outlook for growth in Australia's thermal coal exports is moderate because of lower or slowing import demand in major importing countries such as China, Japan and India, and slowing domestic production, according to the department.

REUTERS