Industry Trend Analysis - Eastern Europe: Russia To Be Relative Growth Bright Spot - SEPT 2016

BMI View : Eastern Europe's iron ore production growth will be primarily driven by Russia over the coming years. Meanwhile, Ukraine's production growth will slow as a combination of hostilities between the Ukrainian government and pro-Kremlin separatists and the country ' s sluggish economic recovery will continue to hurt sector output over the coming years. While Kazakhstan ' s sector holds significant long-term growth potential, sluggish demand and low ore prices will dent the sector ' s growth outlook out to 2020.

Europe's iron ore production growth will vary significantly by country, with Russia being the relative growth bright spot over our forecast period to 2020. We expect Europe's share of global iron ore production to grow slightly from 6.4% in 2016 to 6.6% by 2020. Over the long term, Eastern Europe's iron ore sector holds significant growth potential, as countries including Russia, Ukraine and Kazakhstan hold some of the world's largest iron ore reserves. Russia, Ukraine and Kazakhstan hold more than 34bn tonnes of iron ore combined, accounting for almost 20.0% of global reserves in 2016.

Globally, low iron ore prices will constrain global iron ore production as low prices will continue to put downward pressure on mining firms' revenues, necessitating greater capital and supply constraints ( see: ' Iron Ore: Prices To Retest Lows In 2017 ' , August 2). We forecast iron ore prices to average USD48.4/tonne during 2016-2020, significantly lower than the average of USD97.0/tonne and USD56.0/tonne during 2014 and 2015, respectively. Global iron ore production growth will weaken and average annual growth of 0.1% during 2016-2020, significantly lower than 4.8% y-o-y during 2011-2015.

Share To Falter
Europe - Iron Ore Production (Mnt) & Share Of Global Iron Ore Production (%)
f= BMI forecast. Source= UGS, BMI

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