The Australian government forecasts iron ore spot prices to almost halve to an average of $55/t by the end of this year because of an uncertain supply-demand outlook.
The iron ore price is project to drop to $55/t fob by the end of this year's final quarter, the Australian treasury said.
The Argus iron ore fines 62pc Fe ICX cfr Qingdao was last assessed at $108.50/dry metric tonnes (dmt), which was up from $91.15/dmt on 1 January.
Iron ore prices have remained resilient as the impact of falling steel production outside China has been largely offset by firm demand from Chinese steel producers and supply disruptions in Brazil.
Australia is the world's largest exporter of iron ore, providing the country's largest single share of export revenue.
Metallurgical and thermal coal prices have fallen by around a quarter since the start of 2020 because of weaker global demand and the risk of Chinese coal import restrictions, the treasury said.
Metallurgical coal is forecast to fall to to $110/t fob, with the thermal coal price at $54/t fob. The Argus metallurgical coal premium low-volatile fob Australia was last assessed at $111.30/t, down from $139/t at the end of 2019. Newcastle thermal coal 6,000 kcal/kg NAR fob was last assessed at $47.69/t compared with $65.70/t at the end of 2019.
The treasury forecasts are lower than the government's official commodity forecaster the Office of the Chief Economist. It forecast the iron ore spot price to average $79.50/t in 2020, metallurgical spot prices $126/t and thermal coal at $56/t.
Australian mining exports are forecast to increase by 3pc in the 2020-21 fiscal year to 30 June after a forecast increase of 0.5pc in 2019-20, the treasury said. Iron ore exports are expected to increase in 2020-21 because of continuing demand from China as project expansions support production volumes.
"Lower global coal prices are likely to result in some reduced Australian coal production," the treasury said.
Australian mining investment is also expected to increase for the first time in seven years by 4pc in 2019-20 and another 9.5pc in 2020-21.
Industry consultation and capital expenditure data suggest that investment in large iron ore projects is expected to continue to sustain productive capacity, the treasury said. But global uncertainty and lower commodity prices have led to delays in final investment decisions for new projects.