The State’s finances have factored in a major iron ore price crash, according to Premier Roger Cook, as China’s struggling steelmakers slash output just as major miners boost exports.
The iron ore spot price fell for the fourth consecutive day to $US95.35 a tonne, the lowest point since November 2022, as data from China showed mills reduced steel production to about 83 million tonnes last month — 9 per cent less than a year earlier.
The vast majority of Australia’s iron ore comes from the Pilbara and is fed directly into China’s steel mills.
WA’s iron ore majors continued their share price tumbles on Thursday. By 12.50pm Rio Tinto had lost 3.8 per cent, Fortescue was down 2.1 per cent and BHP dropped 0.9 per cent.
So far this year BHP and Rio have each lost more than 20 per cent of their value, while Fortescue has nearly halved.
The WA government raked in $9.4 billion from iron ore royalties in 2023 — mostly from those three miners — making the steelmaking commodity solely responsible for the State’s $3.2b operating surplus for the 2024 financial year.
Mr Cook on Thursday suggested the WA government had long been anticipating the market carnage.
“Our long term projections are that we think the iron ore price will get around to the mid ($US)70s (per tonne) area . . . our budget projections for our public finances are based upon about a mid 70s, I think it is around that $US75 a tonne,” he said.
“As a government, we are obviously buttressed in relation to those lower prices by the lower Australian dollar at the moment. And so from that perspective, some of those those price drops are mitigated, but this is a sign of the slowing internal demand of the Chinese economy.
“Chinese steel is still continuing to be exported in large amounts, so that’s offsetting that lower demand to a certain extent, but this is expected.”
Mr Cook said “more marginal mines” would “certainly” be under pressure but that there’s “still an awfully large margin” in across the board among iron ore mining operations in WA.
Iron ore is one of the year’s biggest losers in commodity markets, with benchmark prices down by about a third. The struggles facing mills in China were thrown into sharp relief this week as China Baowu Steel — the world’s largest producer — sounded the alarm about an industry crisis as product prices collapse.
The nation’s economy has slowed this year, with officials battling to address a drawn-out property crisis that’s hurt steel demand.
Futures of the steelmaking material retreated by as much as 2 per cent to $US93.70/t — the lowest intraday price since November 2022 — before trading at $US94.60 at 10.30am in Singapore.