Bush Summit: WA Treasurer Rita Saffioti shrugs off iron ore price dip
West Australian Treasurer Rita Saffioti has defended the state’s more bullish price forecasts for iron ore despite a sharp fall in the commodity over China weakness.
West Australian Treasurer Rita Saffioti has defended the state’s more bullish price forecasts for iron ore despite a sharp fall in the commodity over China weakness and said the state must continue to invest amid commodity cycle volatility.
Iron ore prices earlier in August dropped to a 21-month low after China’s largest steelmaker put the industry on edge by saying the sector faced a crisis more acute than the downturns of 2008 and 2015.
The WA government boosted the price forecast for iron ore to $US71 a tonne in its May budget, from $US66 a tonne previously.
However, the Treasurer said continued investment in infrastructure by the WA government was critical amid ongoing weakness in the price of key commodities.
Ms Saffioti’s comments come amid a rout for some critical minerals, including nickel and lithium, and recent weakness in the iron ore price.
While noting that major mining heavyweights were still “travelling OK”, Ms Saffioti said there were a number of challenges across the commodity sector.
“In particular we look at lithium and other areas – there are constant challenges – and that’s why supporting economic infrastructure is a way of helping support companies as they continue to either expand or change their focus over upcoming years,” she said.
According to the National Bureau of Statistics of China, that country’s steel production in July was 82.94 million tonnes, down 9 per cent on the previous month, as mills cut back due to subdued demand, lacklustre prices and tightening margins.
Iron ore’s price then dropped to its lowest level since November 2022, at $US95.25 a tonne, after topping $US144 a tonne on January 3.
However, prices have since topped $US100 a tonne, easing concerns among producers.
BHP this week warned that global instability would bring with it an extended period of commodity price volatility.
The mining giant indicated that, after growing by about 50 per cent from 2010 to 2023, China’s steel sector, while still expected to produce more than one billion tonnes this year – for the sixth year in a row – had plateaued in terms of growth.
China’s voracious demand for steel has underpinned a quadrupling in Australian iron ore exports over the past two decades, with BHP the major beneficiary as the lowest-cost producer in the world. While BHP chief executive Mike Henry said his company would benefit from ongoing demand from China, including for future-facing metals such as copper, the days of surging demand growth for iron ore appeared to be over.
BHP said China’s steel production plateau was expected to continue “across the mid-2020s’’ but demand for its products from elsewhere in developing Asia would offset this to a degree.
The mining giant said it expected a small improvement in global steel production over the next two years led by India and Southeast Asia, while Chinese blast furnaces would ease back this year, “under pressure from subdued steel margins’’.
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