Mine expansions in Brazil and increasing output from India, offset by declining output in China, will result in modest growth for global iron-ore production up to 2028, said research agency Fitch Solutions.

Fitch Solutions on Tuesday published its global iron-ore mining outlook, stating that output would likely grow from 2.8-million tonnes this year to 3.1-million tonnes by 2028.

This represents an average yearly growth rate of 0.9% over the period, which is much lower than the average growth of 2.9% recorded between 2009 and 2018.

“On the one hand, supply growth will be driven by India and Brazil, where major miner Vale is set up to expand output with its new mine. Vale’s supply will continue to dominate global output.

“On the other hand, miners in China, which operate at the higher end of the iron-ore cost curve, will be forced to cut output owing to falling ore grades,” the agency explained.

AUSTRALIA REVISED

Fitch had revised its 2019 iron-ore production forecast for Australia from 903-million tonnes to 882-million tonnes, owing to the impacts of Cyclone Veronica on production and other operational difficulties affecting major miners.

For example, Rio Tinto lowered its yearly iron-ore production guidance by 14-million tonnes as a result of the cyclone and a fire at one of its port facilities, followed by BHP which cut its yearly guidance by six-million tonnes, also as a result of the cyclone.

The agency said iron-ore output would grow minimally over the 2019 to 2028 period, averaging a 0.4% yearly growth rate, compared with a 10.4% growth rate over the prior period between 2009 to 2018.

This is owing to the mothballing of mines by junior miners, while major miners will stick to their production growth targets to crowd out high-cost producers.

“Majors continue to decrease costs and increase production in the longer term. We expect majors Rio Tinto, BHP and Fortescue Metals Group to drive Australian iron-ore production.

“Remaining cost-competitive will be a focus for iron-ore miners in a long-term weak price environment, with top firms investing in technology to maintain an edge,” said Fitch Solutions.

BRAZIL REBOUND

Fitch reported that Brazil’s iron-ore production was expected to rebound in the coming years, owing to low operating costs and a solid project pipeline.

The agency forecast the country’s iron-ore production would decrease to 443-million this year, then return to growth, reaching 567-million tonnes by 2028. This is an average yearly growth rate of 1.5%.

This year’s output was impacted on by the Brumadinho dam collapse, which led to many investigations into Vale’s operations and consequently delayed operations. Vale decided to decommission its remaining upstream tailings dams over the next three years, effectively cutting off 40-million tonnes of yearly iron-ore production.

“We expect to see continued regulatory scrutiny over Vale and the iron-ore sector as the government grapples with the deadliest environmental disaster in the nation's history,” noted Fitch.

CHINESE PRODUCTION

China’s iron-ore output is expected to edge lower over the coming years, as weak prices and tightening environmental regulations force higher-cost operations to go offline.

Fitch Solutions expects the country’s output to decline from 802-million tonnes this year to 785-million tonnes by 2028.

Meanwhile, China’s iron-ore imports will slow over the coming years, in line with slowing steel production in the country.

However, while Fitch Solutions anticipates the overall volume growth of China’s iron-ore imports to decelerate, the country’s tightening environmental standards will keep demand for high-grade iron-ore relatively strong, putting a premium on prices.

INDIA COMING UP

The removal of export taxes in the Union Budget for low-grade ores and the country’s Mines and Minerals Act will streamline licensing and reopening of closed mines in India.

However, Fitch Solutions said that, although the policy supported ore output growth, the royalties due to government would limit the sector’s overall growth potential.

Accordingly, the agency expects India’s iron-ore output to grow from 230-million tonnes this year to 241-million tonnes in 2028, representing a yearly growth rate of 2% over the period, compared with a 0.9% yearly growth rate over the prior ten-year period.