Abstract
With the disruption of supplies from India, concerns over slowing economic
growth in China, and the effects of large stockpiles forcing the price of iron
ore through a series of supposed “price floors”, the iron ore
industry has faced a turbulent time during 2011 and 2012. Prices for 63.5% Fe
content Indian fines are likely to remain above US$120/t cfr until the end of
2014. On the long term from 2016 to 2020 prices may trend towards US$85 to
US$95/t, after adjusting for inflation, as new capacity comes on-stream and
forces higher-cost operations out of the market.
From 2006 to 2011, the promise of a high return on investment led to a
decrease in the concentration of corporate control of seaborne trade in iron
ore. During this period, the share of seaborne trade controlled by Rio Tinto,
BHP Billiton and Vale (the “Big Three”) fell to 57.3% of the world
total. This trend is expected to reverse to 2020, as the limited availability
of capital will make securing project financing increasingly difficult for
emerging producers.
It is estimated that 425Mtpy of nameplate capacity will be added from the
middle of 2012 to the end of 2014 and that capacity additions will continue to
exceed 100Mtpy through to 2020. These additions are likely to exceed demand
growth and mostly represent low to medium-cost operations. Consequently,
producers at the higher end of the cost curve - particularly those in China -
will gradually find themselves unable to compete in the open market.
In 2012, a destocking phase among steel producers depressed demand for iron
ore and the World Steel Association expects apparent consumption of finished
steel products to grow by only 2.1% in 2012, down from 6.2% in 2011. During
the period to 2020, however, rising demand from other emerging nations is
unlikely to fully offset the slowing pace of growth in the intensity of steel
use in China. Growth in apparent crude steel use will average 2.9%py from
2012 to 2020. Owing to the on-going shift of steel production to countries
with a higher use of iron ore per unit of steel, demand for iron ore, at
3.1%py, will marginally outpace steel demand.
Uncertainty over the Eurozone affects the iron ore industry through its effect
on demand, as well as on the reduced availability and higher cost of capital.
Revisions of figures on Chinese growth targets and performance are likely to
result in further short term peaks and troughs, although much of the
adjustment to a more realistic outlook has already taken place. Other risk
factors include growing resource nationalism, particularly in Africa, highly
unpredictable energy costs, rising labour costs, and the fate of the Indian
mining industry following the mining bans in Goa and Karnataka states.
Following the slump in prices from June to September 2012, prices are expected
to remain above US$120/t cfr for 63.5% Fe content Indian fines until the end
of 2014, while a restocking phase may push prices towards US$135/t during
2013, although large fluctuations are not unlikely. As new capacity comes
on-stream, the industry's price floor will gradually drop and it appears
likely that the US$100/t price level will be repeatedly tested and eventually
broken towards 2015. In the baseline scenario for the iron ore industry,
prices may trend towards US$85 to US$95/t during 2016 to 2020.
World production of crude steel: compound annual growth
rates of leading producing countries, 2006-2011
Get accurate answers from independent experts
- Which regions are the most likely growth markets during the outlook period?
- What is the status of existing and planned operations?
- What are the trends in the intensity of use of iron ore and steel?
- What will be the driving forces behind iron ore prices through to 2020?
- What upside and downside risk factors does the iron ore industry face?
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Table of Contents
- 1. Summary
- 2. Occurrence and reserves
- 3. Mining techniques
- 4. Specifications of iron ore used in steelmaking
- 5. World production of iron ore
- 6. Review of iron ore and iron production by country
- 7. Supply outlook to 2020
- 8. Apparent consumption of iron ore
- 9. End uses of iron ore
- 10. Demand outlook to 2020
- 11. World trade in iron ore
- 12. Prices of iron ore and upstream products
- 13. Price outlook to 2020
Iron Ore: Market Outlook to 2020, 7th edition 2012 published by Roskill Information Services, Ltd. in December 11, 2012. This report consists of 377 pages and the price starts from US $ 7500.
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