The iron ore supply is entering the most competitive phase of the last 20 years, according to a recent analysis by Allied, with many countries competing for dominance in this market.
Specifically, in October, Brazil’s iron ore exports rebounded strongly, with approximately 40.7 million tons, marking a 15.6% increase on an annual basis. Although shipments had decreased slightly in September, the recent rebound suggests the return of exports.
Regarding Australia, while volumes are increasing in the short term, estimates still show a moderate growth trajectory for its iron ore export volumes in the coming years, on the order of 1.4%. Australia remains China’s dominant, low-cost supplier, but its competitive position is increasingly challenged, both in terms of quality and supply concentration.
Simandou has a production capacity of 130 million tons, which is expected to be achieved within 30 months. According to Rio Tinto, the four blocks of Simandou are expected to produce 22-24 million tons in 2025 and up to 60 million tons in 2027. This translates to a need for 20-22 additional Capesizes as early as next year, according to Howe Robinson. China’s participation in the project is intense. State-owned enterprises, such as Baowu, Chinalco, and China Railway Construction Corp., play a central role in financing the mine.
China’s macroeconomic situation remains the most significant risk for the iron ore market, even with the addition of extra supply. The real estate sector, historically the largest lever of demand, continues to shrink due to the poor financial condition of developers and subdued land sales, limiting the recovery in steel product consumption. At the same time, steel mills are operating with small or negative profit margins, while demographic pressures and reduced household demand are leading to a stabilization in sales of cars, appliances, and machinery, negatively affecting steel product consumption and limiting the growth potential of iron ore demand.
Source: Allied
