August 2022
AME forecasts the iron ore 62% price to average US$120/t in the September Quarter of 2022. It is estimated that low crude steel output from China during the second half of 2022 will diminish the iron ore prices.

The 62% iron ore price is forecast to US$100/t in 2023 and US$87/t in 2024.The cool-off will come as global government stimulus is progressively eased and as iron ore supplies return to normal. Increasing supply from 2023, particularly from Rio Tinto’s Koodaideri and FMG’s Iron Bridge, will start to see the stubbornly persistent market deficit that has scared end-users over the past two years return to surplus.

The contract iron ore BF and DR pellet premiums for the September quarter of 2022 have been settled by Vale. The BF grade pellet premium has been set at US$88/dmt, up from US$60.6/dmt in the June quarter of 2022, based on 65%-Fe fines indexes.

The DR grade pellet premium rises to US$95/dmt, up from US$65.8/dmt. The high pellet premium is due to the Russian invasion of Ukraine reducing supply in an already tight market. AME estimates that BF and DR pellet premiums will be well supported by supply disruption due to the conflict.

China is still willing to take the economic damage rather than relinquish its zero-Covid strategy. The central government now is seeking to achieve the best economy results, rather than the 5.5% GDP growth target. The government said that stick to “dynamic” zero-COVID policy and efforts to stabilise property markets. China’s economy has a taken a turn for the worse in the June quarter of 2022 with a slump in the property sector deepening and job cuts.

In line with energy transition, producers are looking to produce ‘green steel’ and charge a premium for it. DRI supply is expanding across the global steel industry. The accelerating move towards reducing carbon emissions, and the increase in the capacity of DRI modules have renewed interest in the sector. In addition, use of hydrogen reduction as a production method has also been attracting increased attention.

The DRI production process has traditionally been pursued in oil-producing countries. However, it is now spreading to other regions on the back of policies aimed at reducing carbon emissions. Chinese steelmakers are required to reach peak carbon emissions by 2030 and net-zero carbon emissions by 2060. Many steel companies, including HBIS, Baowu Steel and Ansteel, set targets to realize this by 2050.

Baosteel’s subsidiary Baoshan Iron and Steel has commenced construction of a H2-DRI plant at Zhanjiang Iron and steel in Zhanjiang. The DRI plant will have 1Mt capacity and be equipped with state-of-the-art technology including systems for loading and unloading of raw materials.

Further equipment includes a system for cooling products, a water treatment plant, and a dust removal system. Once commissioned the new facility is expected to reduce annual CO2 emissions by 500kt. Total investment of the project is US$300m with operations expected to begin in late 2023.