Seaborne iron ore prices continued their steady rise into the high $70s on Monday. Australia says it still expects a low average price this year, but the start of the year has been far stronger than many expected, especially relative to steel.

The Kallanish index for 62% Fe Australian fines gained another $0.57/t on Monday to $76.88/dry metric tonne cfr Qingdao. On the Dalian Commodity Exchange May iron ore settled up CNY 2/t at CNY 541.5/t ($83.51/t), while on the Singapore Exchange February 62% Fe futures settled up $1.71/t at $75.93/t. The coming increase in steel production from late March is still supporting prices, but steel prices will have to catch up soon or iron ore may stumble again.

Australia’s Department of Industry, Innovation and Science is not optimistic on the outlook of the key export earner, however. It expects iron ore prices to average $51.50/t in 2018, and then $49/t in 2019, compared to an average of the Kallanish index of $70.84/t in 2017. As reports have noted, this is also below the $64/t expected by Citi Bank and UBS.

Despite the recent robustness of prices for high grade iron ore fines, the department points to weaker Chinese demand and increasing supply. Demand will be influenced by the uncertain Chinese market, with some forecasts for steel demand set to slow to zero growth. A growing share of electric arc furnace capacity and growing scrap use will also further pressure iron ore demand. Supply, meanwhile, is expected to increase with both Brazil’s Vale and Australian miners still expecting significant increases in capacity over the coming years.