It is expected that the annual average price of global iron ore surplus will continue to decline in 2024
According to Mysteel's annual report, the prices of commodities denominated in US dollars continued to decline in 2023 due to the continued impact of global tightening monetary policies. The average annual price of iron ore in 2023 was 119.46 US dollars/ton, a year-on-year decrease of 0.6 US dollars/ton, a decrease of 39.35 US dollars/ton from the average price of 158.81 US dollars/ton in 2021, which is the lowest price in the past three years. Since the rebound in 2015, iron ore prices have entered a downward cycle after peaking in 2021.
In 2023, China's steel exports reached a nearly 7-year high, and the marginal supply and demand in the iron ore market have diverged. According to Mysteel's annual report, since 2023, China's iron ore arrivals and demand have maintained a significant year-on-year increase, especially with high iron production and consumption. As a result, the overall level of port iron ore inventory is lower than last year, and the lowest inventory has been reduced to 108.456 million tons. Subsequently, the profits of steel companies continued to improve, and with the addition of molten iron reaching new highs in previous years, the blast furnaces of steel mills continued to resume production after the first round of production reduction. The efforts to clear and pick up goods at ports also continued to increase, and port inventories continued to decrease; In the fourth quarter of 2023, most steel mills will undergo routine maintenance before the end of the year. In addition, with the weakening profit margin of steel mills and the impact of environmental policies, the production of molten iron will decline, and the inventory of imported ore ports will return to the increasing channel. As of December 29th, the inventory of 45 imported mining ports in China was 119.9173 million tons, a decrease of 200.88 million tons from the high point of the year.
Mysteel's annual report provides several prospects for the supply and demand of iron ore in 2024.
In terms of overseas demand, the production of some new production capacity in the overseas market in 2024 and the improvement of production capacity in some countries may lead to a rebound in foreign iron ore demand. In addition, direct reduced iron is expected to continue to increase production at the current growth rate. Overall, overseas pig iron and direct reduced iron will increase by approximately 26 million tons in 2024, with a total ore consumption of 43 million tons.
In terms of iron ore supply, the global iron ore production is expected to increase by 62 million tons in 2024. Among them, the domestic iron concentrate production is expected to increase by 15 million tons after the resumption of old mine production and the production of new production capacity. The overseas iron ore production is expected to be lower than its overall ore consumption level, resulting in a year-on-year decrease in the amount of overseas iron ore supply overflowing to China. Overall, it is expected that China's imported ore volume will increase by about 4 million tons.
In terms of domestic demand in China, from the perspective of finished product demand in 2024, it is expected that the overall demand for crude steel production will decrease by 3 million tons. In addition, domestic steel mills are expected to net eliminate 6.12 million tons of pig iron production capacity in blast furnace capacity replacement in 2024, while the consumption of scrap steel is expected to increase. Overall, the domestic pig iron production is expected to decrease by about 8 million tons.
In summary, Mysteel's annual report believes that global iron ore supply continues to increase with the support of early project production, and global iron ore demand is generally stable but regional differentiation is beginning to reverse. There is still room for growth in the demand for iron ore in overseas countries, especially in Southeast Asia and other countries with great potential for iron ore demand. However, China is expected to see a decrease in demand for iron ore due to the impact of capacity replacement and increased scrap steel usage. Overall, it is expected that there will be a global surplus of iron ore in 2024, and the annual average price of iron ore will continue to shift downward.