Iron ore production fell last year for the first time in seven years but continuing demand for the raw material from the Chinese steel industry ensured that the volume of trade increased again.
According to the report published by the UN Conference on Trade and Development in cooperation with the Sweden based Raw Materials Group, global production dropped by 6.2% to 1.588 billion tonnes.
Australia is now the largest producer of iron ore in the world, with 394 million tonnes produced in 2009, followed by Brazil at 300 million tonnes, India at 257 million tonnes and China at 234 million tonnes.
Australia exported the equivalent of 92% of its output, an increase of 17%, ahead of Brazil and India.
But growing demand for iron ore in China, coupled with a fall in that country’s domestic production because of some mine closures, meant that international trade reached a record level of 955 million tonnes last year, a rise of 7.4%.
China is now by far the largest importer of iron ore, accounting for two thirds of global imports and the world’s most populous nation is expected to exert an increasing influence on prices.
The report predicts that iron ore prices are likely to increase because the major producers are consolidating and the consumers are fragmented, leading to a sellers’ market. But the outlook for prices remains uncertain.
The report cautioned that supply would continue to lag behind demand in the short term, while pricing had become more obscure following the breakdown of an annual benchmark negotiation process on iron ore markets earlier this year.
Mr Alexei Mojarov UNCTAD official said that “We think that this year and next year the world iron ore market will be characterized by tight conditions. New iron ore mining capacity coming online would gradually bridge the gap with continuously growing demand over the coming years. We believe that in the future the supply will gradually catch up and prices will gradually decline from present extreme levels but will stay at a higher level than 2008.”
The report said 75 million tonnes of new capacity came on tap last year, with 685 million tonnes expected to come on stream between 2010 and 2012.