Industry Forecast - Iron Ore: Growth In 2018 - MAR 2018

BMI View: Russia's iron ore industry will benefit from recovering domestic steel production in 2018 and from domestic construction growth and continued currency depreciation in the longer term. Production growth in the country will nevertheless remain muted over 2018-2027 as Chinese consumption eventually wanes and iron ore prices come down from current levels .

Latest Developments

  • We forecast iron ore prices to drop from USD71/tonne in 2017 to USD55/tonne in 2018 as Chinese economic growth shifts away from heavy industry to services, dampening global demand for iron ore.
  • Russia's iron ore production growth will accelerate from -0.9% in 2017 to 1.5% in 2018, supported by recovering domestic steel production this year (3% y-o-y).
  • Solid domestic construction sector growth and a depreciating Rouble will offer tailwinds to the iron ore sector over 2018-2027, although production growth will nevertheless remain sluggish over that time frame, averaging 1%, due to declining iron ore prices.
  • Russia holds more than 25bn tonnes of iron ore reserves, making it the third largest global holder of reserves, after Australia and Brazil, respectively.

Structural Trends

Currency Weakness To Benefit Russia, But Hurt Ukraine
Select Countries - Exchange Rate (LCY/USD)
f = BMI forecast. Source: IMF, BMI

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