Australia’s world-class iron ore deposits will support growth, create jobs and sustain regional communities for many decades, according to a report released by the Minerals Council of Australia.

Iron Ore: When Quality Meets Opportunity examines how and why Australian iron ore is well positioned as a low-cost producer of world-class iron ore to supply Asia’s high-efficiency large steel mills.

In 2019-20, Australia exported $103 billion of iron ore (22 per cent of Australia’s total goods and services exports), providing a massive contribution to wages, jobs, local communities and funding for essential services during the COVID-19 pandemic.

Western Australia accounts for about 95 per cent of the nation’s iron ore exports.

Chinese demand and supply constraints in Brazil combined to create a surge in iron ore prices last year.

The extent of the value to WA was reflected in Treasury figures released in February that revealed iron ore royalties for 2020-21 had increased $2.1 billion since a mid-year review in December, giving the State Government a $3.1 billion operating surplus. The figure was also helped by a $269 million in stamp duty from a resurgent real estate market.

The figures revealed Treasury had adjusted its price forecasts for 2020/21 from $US103.7 a tonne to $US134.3 a tonne, but also said iron ore would fall to its long-term average of $US64 a tonne by August.

NAB and Capital Economics have forecast prices of around $US100 a tonne by the end of the year or early 2022.

The iron ore spot price was about $US160 a tonne in mid-February.

Fitch Ratings has forecast prices to fall during the rest of the year but said the average price for 2021 would $US120 a tonne and $US100 next year.

Investment bank Morgan Stanley has speculated the price could hit $US200 a tonne this year while Credit Suisse had opted for an average price this year of $US150 and $US120 in 2022.

The Office of the Chief Economist, in its Resources and Energy Quarterly report in December, said Australia’s iron ore export earnings were on track for a new record in 2021.

It forecast the iron ore price to remain at about $US100 a tonne until mid-2021 before easing to just over $US75 by the end of 2022.

“Stronger prices are expected to push Australia’s iron ore export values up to a peak of $123 billion in 2020/21,” the report said.

The MCA report said China was still experiencing significant growth and new frontiers in South and East Asia would be exciting new markets.

The Department of Jobs, Tourism, Science and Innovation’s iron ore profile released in December last year said WA had an estimated 48 billion tonnes of economic demonstrated iron ore resource in 2019-20, which could sustain production for 53 years (at 2019‑20 production rates).

The MCA report said that notwithstanding the Pilbara’s vast resource base and installed infrastructure, there were challenges looming which would influence the future of Australian iron ore production.

“A more competitive market environment is evolving as new supply enters the market,” the report said.

“Australian producers are well placed to continue to prosper in this situation, given the large, high quality, low-cost direct shipping ore resource base, coupled with the substantial installed infrastructure and proximity to market advantage over competitors.”

Increasing focus on greenhouse gas emissions means steel mills will seek higher iron ore content   (Fe) products, a trend that will likely incentivise more beneficiation in the Pilbara.

The report said opportunities existed by developing new deposits near existing infrastructure and to increase production and reduce costs through increased process and supply chain optimisation and automation.

“These are areas in which the Pilbara is already considered an industry benchmark,” the report said.

“The extensive resources and infrastructure network, coupled with the industry leading mining skills and workforce base built up over decades, has Australia well positioned to rise to the challenges and to seize the opportunities ahead.”