COMMODITIES 2025: Australia to widen lead as top iron ore producer in 2025 and beyond

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

Australia is set to strengthen its dominance over iron ore production in 2025, and potentially beyond, as emerging markets provide demand optimism, according to S&P Global Commodity Insights analysts.

The country's low-grade but still relatively good-quality iron ore will benefit from India's growing demand. China's blast furnaces will also need more Australian iron ore as the manufacturing powerhouse struggles to shift to lower-carbon production processes that use scrap or higher-quality iron.

"Australia is likely to increase its market share in iron ore production for 2025," Nasiha Fauzi, a senior research analyst for dry bulk commodities at Commodity Insights, said in an email.

Australia's iron ore exports are expected to rise from a projected 953 million mt this year to 971.9 million mt in 2025, according to S&P Global Commodities at Sea data as of Nov. 6. Exports from second-ranked producer, Brazil, are set to fall to 387.3 million mt from 393.2 million mt.

Iron ore upside for Down Under

India's growing steel production capacity and infrastructure development will drive a significant increase in demand for iron ore, Fauzi said, "especially as domestic supplies may not meet future needs, thus possibly become a new destination for Australian iron ore shipments."

As the world moves toward decarbonization, Indian steel mills will likely increase their imports of higher-grade iron ore, especially those from Down Under which are higher grade than India's own, said Pranay Shukla, head of dry bulk freight and commodities research at Commodity Insights.

"The increase in demand for high-grade ore will also imply the possible displacement of Indian materials, which most of the time are of low grades," Fauzi said.

Ronnie Cecil, Commodity Insights' principal analyst for metals and mining, also sees India emerging as a new market for imported iron ore longer-term. Cecil said he would not be surprised if major producers BHP Group Ltd. and Rio Tinto Group start seeing the country as a potential growth market in the next five years.

"It's not easy to get very big mines going, and it's also not easy to find good-quality iron ore," the analyst said.

BHP noted the rapid growth in India's steel capacity in its August economic and commodity outlook. "India is ... likely to make up for a proportion of China's anticipated steel production decline" once the latter's steel production plateau ends in 2024, BHP said.

BHP expects India to quadruple its annual steel requirements in the coming 25 years compared to the start of this decade, which will be complemented by rising demand in the rest of emerging Asian economies. "These regions today have very low steel stock per capita at about 2 [mt] per capita, with considerable potential for growth in the decades to come," the miner said.

New projects that are coming online in Australia and supported by well-developed mining infrastructure and logistic capabilities will "ensure efficient production and transportation of iron ore to key markets, primarily in Asia," Fauzi said. "Australian iron ore exports are anticipated to increase to cater to the rising demand ... in emerging economies such as India and Vietnam where steel production is growing."

Electric arc furnaces struggle

While China's crude steel production will gradually trend down in coming years, it is expected to remain largely blast furnace-driven, which will support demand for Australia's iron ore, according to Paul Bartholomew, a senior analyst covering ferrous and aluminum at Commodity Insights.

"China has invested heavily over the past decade or so in its fleet of high-quality blast furnaces, so iron ore will remain the staple raw material for many years to come," Bartholomew said.

More than half of respondents in Commodity Insights' China Iron Ore & Steel Survey for the October-December quarter thought the EAF steelmaking ratio would not reach 15% by 2025, compared to just over 10% currently.

This is despite China's government setting a target of 30% EAF steel production by the end of the decade, Bartholomew said.

"We expect the weak steel mill margin environment to continue in 2025, putting pressure on more expensive EAF production," the analyst said.