Engineering & Mining Journal

NOV 2012

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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IRON ORE REVIEW Table 1—Global Iron Ore Production (million mt) Country/Region 2009 Sweden Sub-total, Europe excl. CIS CIS Sub-total, Europe Canada USA Brazil Venezuela Sub-total, Americas Mauritania South Africa Sub-total, Africa India Sub-total, Asia excl. China China1 Sub-total, Asia Australia Sub-total, Oceania Total, World Source: UNCTAD 2012 down from 17.3% in 2010 and far below the peak of 20% in 2007. We make our estimates based on a careful analysis of pig iron production in China and iron ore import statistics. We consider these figures to be more reliable than the Chinese gross figures for iron ore production without con- sideration of grade or iron content of the ore produced. In more general terms, for the long run Australia and Brazil will be the dominant forces in iron ore production. India, which has large and good-quality resources of iron ore, will be hampered by red tape and an ongoing internal struggle. Over time, as the Indian steel industry grows, most of its iron ore will be used domestically. We also foresee a slow decline in Chinese output. World pellet production rose by 3.5% in 2011, from 402 million mt in 2010 to 416 million mt, reaching a new record. This reflects a continued increase in demand for pellets in many countries, although the weakness of the steel market has led to reduced growth in pellet demand relative to total iron ore demand. It deserves to be noted that production of pellets in China increased by more than www.e-mj.com total iron ore production, reflecting the beginning of a shift toward increased use. Iron Ore Trade Stagnant, Except for China International iron ore trade reached a new record in 2011 as exports increased for the tenth year in a row to 1,155.0 million mt, up 7.9%. The increase was largely the result of higher demand from China, while most other countries in the world had trade levels similar to the previous year and have not reached their import levels of 2008. Australia's exports increased by 8.9% to 438.8 million mt in 2011 compared with 2010. With important markets in Europe and the Americas picking up pace, Brazilian exports, which fell sharply in 2009, had definitely turned around in 2011 with an increase of 12.1% com- pared with 2010, to 348.6 million mt up from 310.9 million mt. Exports from India fell for the second consecutive year after 2010 marked the first time in 12 years that the country had experienced de- creased exports; but at 78.8 million mt, down 17.8% from 95.9 million mt, India is still the third most important exporter. 0,017.7 0,023.0 0,177.1 0,200.1 0,033.0 0,026.7 0,305.0 0,014.9 0,407.3 0,011.4 0,055.4 0,070.1 0,218.6 0,271.2 0,222.7 0,493.9 0,394.1 0,396.2 1,567.5 0,880.2 2010 0,025.3 0,031.8 0,204.4 0,236.2 0,037.5 0,049.5 0,372.0 0,014.0 0,506.1 0,011.3 0,055.0 0,069.3 0,212.0 0,273.9 0,315.4 0,589.3 0,432.8 0,435.2 1,836.1 1,064.7 2011 0,026.1 0,033.2 0,203.5 0,236.7 0,037.1 0,053.6 0,391.0 0,016.0 0,534.2 0,011.4 0,052.9 0,068.9 0,196.0 0,270.6 0,321.9 0,592.5 0,487.9 0,490.2 1,922.5 1 Iron ore production tonnage figures have been converted to an iron-ore content level roughly equal to rest-of-world average: Ore production, China (unconverted): 1,327.0 Ukraine, Kazakhstan and Russian Federa- tion increased their exports. China remains the world's largest iron ore importer. In 2011, its imports were 686.7 million mt, an increase of 11% compared with 2010. In 2010, China accounted for almost 59.1% of global imports; in 2011, this figure had increased to 60.1%. In Japan, imports fell by 4.4% to 128.4 million mt. In the Republic of Korea, imports increased by 15.3% to 64.9 million mt. European imports (ex- cluding the CIS countries), increased by 16.8%, reaching 156.4—up from 133.9 million mt in 2010, corresponding to just above 13.7% of world imports. In 2011, the seaborne iron ore trade increased by 7.2%, to 1,060 million mt. The increase was almost entirely due to higher Chinese imports, with trade in other parts of the world stagnating. Prices Keep Rising Iron ore prices continued on an upward trend through most of 2011, as Chinese demand recovered and domestic Chinese iron ore producers were unable to keep up with the demand. Toward the end of the year, however, prices declined in response to a slowdown in Chinese growth and a worsening outlook for European countries. During the first half of 2012, prices remained more or less constant at a level which, although high from a historical point of view, only allows high-cost produc- ers, mainly in China, to break even. With almost all iron ore producers and steel mills having abandoned the bench- mark pricing system, there is widespread confusion about prices. Practices for price setting vary widely and there is a large number of published prices and indices, each with a different product specification. Vale and Rio Tinto apply quarterly determined prices to most of their sales, with the price being set on the basis of spot prices during the preceding months. There have, however, been deviations from this practice, particularly in instances when spot prices have fallen rapidly, as in late 2011, and buyers have insisted that the new lower prices be applied. BHP Billiton is believed to sell a large share of its pro- duction on a spot basis. As for published prices, there are three competing price indices: Metal Bulletin, Platts and The Steel Index (TSI). The indices sometimes differ by a few dollars per ton, but the differences tend to disap- NOVEMBER 2012 • E&MJ; 43

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