The Christmas gift that keeps on giving is the rally in the iron ore price. Its January 2 level of $141 m/t (seen in our graph) represents a 30% premium on its January 3 price of a year ago. This rise partly accounts for international steel prices edging upwards in the latter half of 2023. What´s more, the likelihood is that strong demand for iron ore will continue as 2024 progresses, according to the Australian Government´s Office of the Chief Economist. In its December 2023 Resources and Energy Quarterly, the Office says: “New infrastructure investment in China — resulting from substantial levels of funding allocated over the past year — as well as new measures by the Chinese government to alleviate weakness in the domestic property sector, should provide support for construction activity, and hence Chinese steel and iron ore demand into 2024 and 2025.”  The report noted that production cuts in China were not strictly enforced in 2023, as the government prioritised economic growth over other considerations such as CO2 emissions. Iron ore imports will therefore continue to flow into China’s stronger than expected steel production schedule. Demand for the commodity should also

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receive some support from the restocking of iron ore inventories in China in the coming months. The Resources and Energy Quarterly concludes that Australia’s iron ore export earnings will rise from $124 billion in 2022–23 to $131 billion in 2023–24. Good news for Australian industry and for the federal government with respect to tax receipts. However, the report then sees iron ore export earnings falling to $102 billion in 2024–25, driven by lower prices over the outlook period. On a wider basis, the report envisages that a stabilisation and gradual pickup in global industrial production will combine with further stimulus-related infrastructure projects to support stronger growth in steel demand in 2024. World steel production is projected to grow by 1.6% in 2024 and 1.4% in 2025, to reach just under two billion m/t by the end of 2025.

The Australian domestic market continues to outshine most other markets in the developed world – as has been the case over recent months and quarters. That said, there is considerable unevenness within our steel industry. Capital cities tend to do best; however, not all capital cities are performing equally. In regards to steel demand, not much is likely to change in the short-to-medium term. The big infrastructure projects will continue their consumption of most of the domestic steel supply. However, logic would also suggest that the high number of migrants coming to Australia would prompt a significant boost in steel demand for the construction of additional housing. And yet, weak dwellings approval figures from the Australian Bureau of Statistics during 2023 do not support that logic. The reality of the significant undersupply of accommodation for those incoming migrants certainly needs a solution somewhere along the construction road: and sooner rather than later. Quite why it hasn´t come already is baffling. Perhaps the market is overly mindful of the continuing pressure on home loans and is therefore slow to jump. Or perhaps there is simply a shortage of funds. Or maybe it´s a combination of these and other hidden factors. Hopefully the year ahead will find the solution.