Higher Demand For Iron Ore Expected From China, Japan And The EU

Demand for iron ore and coal is expected to grow next year, which reflects the production of steel higher, pushing the output was close to capacity.

Australian Bureau of Agricultural & Resource Economics said the world trade in iron ore will increase by 8 percent to 987 million tons in 2010, compared with an estimated increase of 2 percent in 2009.

"The main contributors tend to increase in import demand of China, Japan and the European Union," said the fortune-teller's quarterly report said commodity. "However, the volume of imports for most countries, except China, is expected to remain under the year 2008."

ABARE said most of the growth in import demand is expected to be arrested by the Australian and Brazilian iron ore exporter, which reflects their cost competitiveness compared with other producers.

"Thus, the production in these countries are expected at, or close to capacity during the year 2010," ABARE said.

Australian iron ore exports is expected to increase by 9 percent to 394 million tons in 2010, when significant additional production capacity and exports are expected.

China will remain the main drivers of demand, but consumption is also expected to rise gradually in OECD economies.

In 2010, prices for most minerals and energy commodities is expected to be higher in year-average terms.

"However, the increase of mineral and energy prices in 2010 is not expected to be large, especially considering the price increase has occurred and assumed a gradual recovery of economic growth the OECD," ABARE said.

The total value of commodity exports in the year to June 30, 2010, now estimated at $ 162.56 billion, up 2.7 percent from the September estimate but down 18 percent on actual exports of the revised record $ 197.44bn last fiscal year.

Export value of metal and other minerals in 2009-10 is estimated down 10 percent year on year to $ 75.27bn, up 2 percent from the estimate in September.

Head of ABARE commodity analyst Jammie Penm said that compared with expectations a year ago, the economy is performing better than previously expected because Asian economies are emerging to handle downturn better than some OECD countries.

"If this strong economic growth in Asia continues to grow, then the OECD countries gradually recover, then that would be the optimal situation in our economic prospects," he said.

ABARE also expects the export value of agricultural products fell by 6 percent to $ 30bn in 2009-10, after a significant increase from 16 percent to $ 32bn in 2008-09.