The world’s largest iron ore exporter delivered a mixed message on the outlook, raising near-term price forecasts but combining that revision with a more somber message that China’s gargantuan imports are set to level off as steel production eases in the coming years.

Iron ore will average $61.80 a metric ton this year and $51.10 in 2019, Australia’s Department of Industry, Innovation and Science said in a quarterly report on Monday. That compares with projections of $52.60 and $48.80 in the previous outlook. The forecasts are for free-on-board prices.

Prices are “expected to moderate, to better reflect the fundamentals of growing low-cost supply from Brazil and moderating demand in China,” the department said, predicting rising global volumes this year as well as next, driven by new mines including Vale SA’s giant S11D project in Brazil. Steel production in China will drop each year through to 2023, while iron ore shipments from Australia and Brazil rise before leveling off, it forecast.

Iron ore received a battering in March, collapsing into a bear market, as investors fretted about weaker-than-expected springtime demand in top user China, record holdings accumulated in mainland ports, and jitters about global growth as the U.S. and China swap barbs on trade. Barclays Plc is among banks that have flagged the risk of a further weakening of prices this quarter, highlighting the potential for a switch away from higher-content ores, which have seen strong demand as Beijing acts to battle pollution.

“Iron ore import demand is expected to be weighed down by declining steel production in China,” the department said. “The main drivers of declining steel production are slowing construction activity and infrastructure investment, and increasingly stringent environmental regulations.”

Lower Prices

The spot price for ore with 62 percent content in northern China was at $63.35 a dry ton on Wednesday, ahead of a two-day mainland break, according to Mysteel.com. That compares with $73.50 at the end of last year, and this year’s peak of almost $80 in late February. So far in 2018, the raw material has averaged about $73 a ton. On Monday, futures in Dalian and Singapore rose.

Among the department’s projections, China’s iron ore imports are forecast to ease from 1.08 billion tons this year to 1.04 billion in 2023. At the same time, nationwide steel output will fall from 832 million tons this year to 805 million in 2023, while local steel usage contracts from 772 million tons to 742 million.

“The projection for China’s steel consumption implies a leveling in China’s steel intensity—the volume of steel consumed per person—and results in China following a different trajectory to Japan or South Korea,” it said. “Unlike these countries, which consume large amounts of steel in industries like automobiles and shipbuilding, China’s development path is not expected to follow the same scale of steel-intensive export growth.”

China is the world’s largest steelmaker and the top buyer of seaborne ore, with mills taking cargoes from miners including Vale and Australia’s Rio Tinto Group, BHP Billiton Ltd. and Fortescue Metals Group Ltd. Imports rose to a record 1.07 billion tons in 2017 after almost tripling in the past decade.

In the run-up to the report’s release, Australia’s Port Hedland, which handles cargoes for BHP, Fortescue and Gina Rinehart’s Roy Hill project, reported record volumes for the month of March. Exports rose to 42.08 million tons last month, from 38.5 million in February and 39.09 million a year earlier, according to port authority data on Friday.