The figures highlight that while the price of iron ore has fallen sharply over the past year, production and exports of the commodity rose to record levels in the year to June.
Data from the Pilbara Ports Authority yesterday showed the Port of Port Hedland shipped a record annual 454.2 million tonnes of iron ore in 2015-16, up 3% or just over 14.6 million tonnes from 2014-15.
The port finished the financial year with a surge as iron ore exports jumped 9% to an all time high of 41.8 million tonnes in June (30 days), up 3.4 million tonnes from June, 2015. It was also 2.3 million tonnes more than the previous monthly record of 39.5 million in March (31 days). The increase was due to higher production from the Roy Hill mine.
The figures confirm the sector has recovered from the cyclone and wet weather in January, when iron ore exports slumped to their lowest in 18 months as production slowed in the mines and ports were closed for a couple of days.
Those interruptions prompted BHP Billiton to cut its export guidance from 270 million tonnes to 260 million tonnes for the 2015-16 financial year. BHP, Fortescue Metals Group, Gina Rinehart’s new mine, Roy Hill and struggling Atlas Iron ship their iron ore through Port Hedland.
Port Hedland statistics do not reflect the shipments of the nation’s biggest iron ore exporter, Rio Tinto, which has its own port about 220 kilometres south-west at Cape Lambert.
Rio and BHP will release their quarterly production numbers next week on July 18 and 20 respectively, while Fortescue follows on July 28.
Australia on Friday cut its 2016 iron ore price forecast by nearly 2% to well under current prices, citing concerns over slowing growth in demand and said it sees little chance of an improvement in 2016-17.
The department now sees iron ore averaging $US44.20 a tonne this year versus a $US45 forecast in March and a December forecast of $US40.40.
"Despite the large movements in prices, the market fundamentals are broadly unchanged – demand growth is slow and the market remains well supplied," Australia’s Department of Industry, Innovation and Science said in its latest quarterly commodities report.
The Department forecast that iron ore prices will be slower to recover in 2017 than previously expected due to continuing oversupply.
It forecasts a price of $US44 a tonne in 2017 versus its previous forecast of $US55 (which is what the 2016-17 budget is based on).
Overall, the Department said that "Despite the relative resilience in prices in the first half of 2016, the risks to prices remain firmly on the downside. This reflects expectations of subdued consumption growth and ample supply. The largest price revision has been made to iron ore. The revision is based on the assessment that loss making operations may continue to produce for longer than previously expected. It also factors in increased supply from India and additional cost reductions reported by iron ore producers.”
"Over the remainder of 2016 and into 2017, prices are generally forecast to remain low. Prices for bulk commodities are forecast to decline, in line with slowing consumption growth and ample supply. Conversely, metals prices have more upside potential, as consumption is forecast to be relatively stronger than for the bulk commodities and production is constrained by various factors. However, any price rises for these commodities are expected to be moderated by excess supply capacity, which is likely to be re-started if prices increase enough.
"The risks to the commodity price forecasts over the next eighteen months remain firmly on the downside. Most of this risk is related to uncertainty around world economic prospects and the associated appreciation of the US dollar. The flow-on effects of the United Kingdom’s decision to leave the European Union are still unclear,” the Department said.
"The downward revision to Australia’s iron ore earnings was partly offset by upward revisions to earnings from several other commodities, including gold, metallurgical coal, oil and gas. On balance, the total value of Australia’s resources and energy export earnings have been revised down slightly from the March edition of the Resources and Energy Quarterly.” (down 8% to $158 million, according to the department).
Mark Cully, the Department’s Chief Economist said in Friday’s statement:
Australian (commodity) producers are well-placed to fulfil demand for resources and energy over the next eighteen months, despite difficult operating conditions.
"In particular, production of bulk commodities is forecast to increase, even as prices decline. As a result, Australia’s earnings from resources and energy exports are forecast to increase by 3 per cent to $163 billion in 2016–17,” he forecast.
Iron ore was priced at $US55.68 last night in Asia.
