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higher demand for iron ore

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    Higher demand for iron ore expected from China, Japan and the EU

    Sarah-Jane Tasker From: The Australian December 16, 2009 12:00AM

    DEMAND for iron ore and coal is expected to grow next year, reflecting higher steel production, pushing Australia's output close to capacity.
    The Australian Bureau of Agricultural & Resource Economics said world trade in iron ore would increase by 8 per cent to 987 million tonnes in 2010, compared with an estimated rise of 2 per cent in 2009.

    "The main contributors to increased import demand are likely to be China, Japan and the European Union," the forecaster's quarterly commodities report said. "However, import volumes to most countries, with the exception of China, are forecast to remain well below those of 2008."

    ABARE said most of the import demand growth was expected to be captured by Australian and Brazilian iron ore exporters, reflecting their cost competitiveness compared with other producers.

    "As such, production in these countries is expected to be at, or close to, capacity throughout 2010," ABARE said.

    Australian iron ore exports are forecast to increase by 9 per cent to 394 million tonnes in 2010, when significant additional production and export capacity are expected.

    China will remain the main driver of demand but consumption is also forecast to increase gradually in OECD economies.

    In 2010, prices for most mineral and energy commodities are forecast to be higher in year-average terms.

    "However, the increase in minerals and energy prices in 2010 is not expected to be large, especially given the price gains that have already occurred and the assumed gradual recovery in OECD economic growth," ABARE said.

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

    The value of exports of metals and other minerals in 2009-10 is forecast to fall 10 per cent year on year to $75.27bn, up 2 per cent from an estimate in September.

    ABARE chief commodity analyst Jammie Penm said that compared with the expectations a year ago, the economy had been performing better than previously expected because the emerging Asian economies were handling the downturn better than some of the OECD countries.

    "If this strong economic growth in the emerging Asian regions continues, then OECD countries gradually recover, then that will be the optimal situation in economic outlook for us," he said.

    ABARE also expects the value of farm exports to fall by 6 per cent to $30bn in 2009-10, following a significant rise of 16 per cent to $32bn in 2008-09.
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