Australia on Friday raised price forecasts for its major commodity exports, iron ore and coal, on the back of an unexpected improvement in demand from Chinese steelmakers as construction activity picked up.
In Australia's latest quarterly outlook published by the Department of Industry, Innovation and Science, the country boosted the iron ore price outlook this year by 10 percent to $48.50 a metric ton from $44.20 a ton, while the coking coal price forecast jumped 16 percent to $99.40 a ton from $85.60 a ton. But those forecasts were below current market prices. Both commodities are used in steelmaking.
The Australian government attributed the upturn to the strength of the Chinese construction sector as the mainland government rolled out stimulus measures, including steps aimed at boosting home sales to reduce large inventories in an effort to limit an economic slowdown.
"Prices for most construction and steel-making raw materials continued to grow in the last three months — despite expectations of decline — because of unexpectedly resilient demand from China's construction sector and unforeseen supply disruptions," wrote the department's chief economist, Mark Cully.