Australia is stepping up to help fill the gap in iron ore supply left by the Brumadinho tailings dam collapse.
In the most recent edition of Australian government report Resources and Energy Quarterly, officials touted a “significant change” to commodity forecasts for the country down under. Previous forecasts had indicated export earnings would peak in 2018 and 2019, with expected record earnings of AU$278 billion during that time.
However, the newest prediction is that the peak will be in 2019 and 2020, with resource and energy commodities now docketed to bring in AU$285 billion; iron ore earnings alone are expected to reach AU$79 billion in that time.
According to the report, iron ore prices have been a major component of these shifted forecasts. Global supply has tightened since the disaster at Vale’s iron ore operations, with the company having reported that 90 million tonnes worth of production have been impacted by the incident, putting Australia in a position to help fill the void.
“The fallout from the Brumadinho tailings dam collapse has led to a sharp drop in Brazilian iron ore exports, and this shortfall now looks set to last at least two years. The seaborne iron ore market is thus likely to stay tight, and prices elevated, out to at least 2021,” the report read.
“Extra Australian output will partly fill the gap, as mining expands and disruptive weather in Western Australia recedes.”
Exports of the base metal out of Australia are expected to rise from 2018 to 2019’s 806 million tonnes to 869 million tonnes by 2020 to 2021, with the report citing large producers ramping up to their long-term production targets.
Australia is the world’s largest exporter of iron ore, with 29 percent of the world’s reserves being located in the country; much of the commodity is found and mined within Western Australia’s Pilbara region. With the country’s close proximity to Asian markets, it has been a major supplier to China in particular, with 81 percent of iron ore exports having been sent there in 2018.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.