Engineering & Mining Journal

OCT 2018

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 OUTLOOK 54 E&MJ • OCTOBER 2018 www.e-mj.com toward a continued industry growth. Chi- na alone accounts for roughly half of the crude steel production globally and the country's production of crude steel grew by 6.3% in the first seven months of 2018 compared to the same period 2017. The World Steel Association's Short Range Outlook April 2018 for world steel use, anticipates an increase in world steel demand by 1.8% in 2018, followed by an increase of 0.7% in 2019, compared to a growth of 2.4% in 2017. China's steel de- mand, which represents 46% of total world demand, is expected to be flat in 2018 and shrink 2% in 2019. In comparison to the World Steel Association's earlier forecast in October 2017, global growth in 2017 was 0.4 percentage points lower than predict- ed but the 2018 figures have been revised upwards with 0.2 percentage points. The current decisive factor for steel market prospects is the direction of eco- nomic change in China. It is not the slow- down in Chinese growth per se that would lead the slower steel demand growth over the longer term, but rather the reduced share of investment in Chinese GDP. With lower steel growth, the scrap ratio of the steel burden will also increase as more and more steel becomes available for re- cycling. This will limit the demand growth for virgin units of iron ore. Thus, pig iron production combined with the production of direct reduced iron (DRI) can arguably give a more accurate picture of the de- mand for iron ore than crude steel. In 2017, pig iron production increased by 1.2% or 13.5 million mt and DRI pro- duction increased by 3% or 2.3 million mt. That would generate an additional de- mand of roughly 26.3 million mt of iron ore globally. In China, pig iron production rose 1.8% or 12.6 million mt, which equates to 21 million mt of iron ore. However, glob- al iron ore production increased by 58 million mt in 2017. Clearly, more iron ore is produced than what is demanded, but paradoxically iron ore prices stayed high during the year. This can, at least partly be explained by the increasing price premia for high-quality iron ores and an increasing spread between the various qualities With the completion and ramp up of Vale's S11D and the independent Roy Hill mine, iron ore capacity will proba- bly increase more than demand also in the next couple of years. The production forecast for the "Big 4" (Vale, Rio Tinto, BHP and FMG) for 2018 is 1.18 billion mt an increase of around 50 million mt, in 2021, the production volume could be raised to 1.25 billion mt. The spot price for 62% Fe fines deliv- ered in China will probably remain relatively high for the rest of 2018, however, because of further production increases, 2019 will most likely see iron ore prices under pres- sure. Further, the spread of prices between the low, medium and high-quality iron ores can be expected to remain wide. There seems to be a glut of low-quality ores and a deficit of high-quality iron ore products, especially pellets. If this situation contin- ues, a reduction of production by certain low-quality miners might take place. Chi- nese production of un-beneficiated ore in 2018 has dropped in comparison to 2017. Other producers of high-quality ores might instead increase their production. Anton Löf and Olof Löf are with RMG Consulting, an independent consult- ancy firm based in Stockholm, Sweden. www.rmgconsulting.org. Magnus Ericsson is with Luleå University of Technology. For further details, contact Anton Löf at anton.j.lof@gmail.com. THE HEARTBEAT OF OUR INDUSTRY bauma, Munich, April 8 –14, 2019 Being the world's leading event in the sector, bauma is the ideal environment for successful mining business. Because it gathers about 600,000 experts – including all international key players from the mining and construction industries. Contact: Trade Show Services GACC New York, Inc., kvogelsang@tssworldwide.com, Tel. +1 646 437 1013 THE HEARTBEAT Contact: Trade Show Services GACC New York, Inc., kvogelsang@tssworldwide.com, Tel. +1 646 437 1013 YOUR VISIT. YOUR TICKET TO THE MARKET. www.bauma.de THE HEARTBEAT OF OUR INDUSTRY bauma, Munich, April 8 –14, 2019 Being the world's leading event in the sector, bauma is the ideal environment for successful mining business. Because it gathers about 600,000 experts – including all international key players from the mining and construction industries. THE HEARTBEAT OF OUR INDUSTRY bauma, Munich, April 8 –14, 2019 Being the world's leading event in the sector, bauma is the ideal environment for successful mining business. Because it gathers about 600,000 experts – including all international key players from the mining and construction industries. YOUR VISIT. YOUR TICKET TO THE MARKET. www.bauma.de Connecting Global Competence

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