Article by Daniel Newell courtesy of the West Australian
State Government coffers are set to reap further benefits of elevated iron ore prices for longer, according to global ratings agency S&P, which has upgraded its long-range forecast for WA’s powerhouse commodity.
Investors in the Pilbara’s biggest iron ore players can also expect more bumper dividends after S&P on Friday increased its price assumptions for the steel-making ingredient from $US100 a tonne to $US130/t for the rest of the year.
It also lifted its forecast for prices heading into 2022 from $US80/t to $US100/t.
Prices are still hovering at around $US165/t.
Iron ore prices broke records last year as China’s demand for steel surged as it rolled out stimulus measures aimed at kickstarting an economy hit hard by the coronavirus pandemic.
Pilbara producers took advantage of COVID-related shutdowns in Brazil and ramped up supply, with the likes of BHP, Rio Tinto and Fortescue Metals breaking shipment records and handing bumper payouts to shareholders.
S&P said demand for steel in China would continue to be keep iron ore prices high.
“We anticipate that the global seaborne supply deficit could deepen further in 2021 while the timing of the resumption of activity at Vale’s disrupted mines remains uncertain and will likely to continue to support prices over the next 12 months at least,” S&P analyst Donald Marleau said in a report.
“In our view, global demand will continue to outstrip supply over the next one to two years.”
The Department of Mines, Industry Regulation and Safety last week revealed WA’s iron ore industry had underpinned record sales of mineral and petroleum products last year.
Iron ore sales made up $116 billion of total sales of $174b in 2020, up 17 per cent on the previous year.