Engineering & Mining Journal

NOV 2017

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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Page 34 of 83

IRON ORE REPORT NOVEMBER 2017 • E&MJ 33 the CIS region where Russia increased its export by 5.1% and Ukraine by 2.9%. However, Chinese exports are still domi- nating with 34% of the world total. While the growth rate in Chinese exports seems to have abated, the total volume is still a source of concern to many other steel pro- ducers. The OECD noted that trade mea- sures have increased in the last few years, which could explain the slowdown in the growth of steel exports during 2016. The steel demand recovery during 2016 also impacted steel prices. The world steel price index, which had trended downward since 2011, rose sharply in 2016. Further there has been a shift in the demand struc- ture with hot-rolled coil prices increasing at a faster rate than rebar prices. Steel operating costs have increased because of increases in the price of raw materials. However, the rise in steel de- mand and steel prices has more than offset this and profitability margins did in- crease over 2016 and early 2017. The fi- nancial situation for many steel makers is, however, still challenging. The industry is less profitable than most other industries. Iron Ore Production In 2016, the iron ore market returned to growth following the contraction of 2015. Global output of iron ore increased by 4% to 2.096 billion mt in 2016. Output not only increased in the two most important producing countries, Australia and Bra- zil, it also increased in India and South Africa. Australia continues to grow faster than Brazil. In 2016, the former grew by 3.8%, to 842 million mt, and the latter by 2.1% to 431 million mt. Asian production, which reached a peak in 2007 at 647 million mt, has de- clined almost every year since, mainly due to shrinking output in China and India. In China, output fell 7.9% in 2016, to 114 million mt. The national Chinese produc- tion figures for un-beneficiated ores corrob- orates these figures with a decline of 7.3%. In India, the downward trend may have turned, with production increasing slightly in both 2014 and 2015. In 2016, Indi- an iron ore production grew by 30% and reached 185 million mt. An impressive feat by the country that has been plagued by policies hampering growth, Indian iron ore production fell from 224 million mt in 2009 to 136 million mt in 2013. In 2015, exports were down to 4.2 million mt well below the 2009 peak of 224 million mt. In Europe, including CIS, production declined by 0.2% in 2016, down to 235 million mt. Among declining pro- duction in most countries, Sweden and LKAB managed to increase production by 8.5%. LKABs pellet products are in high demand as a consequence. African production increased by 6.2% to 87 million mt in 2016. In Africa, the two major producing countries, South Africa and Mauritania, both increased produc- tion, the former by 11% and the latter by 16%. Following the bankruptcy of several new miners within Africa, this is indeed good news. During the last couple of years, with the exceptional increase in production from mainly Australia and the falling production in China and India, the share of iron ore being produced by developed countries has increased substantially. In 2016, the fall in Chinese production together with the expansion in Australia could, however, not stop the increase in the portion of world iron ore output ac- counted for by developing countries: from 43.5% in 2015 to 44.2% in 2016. The recovery of the Indian iron ore production is one of the reasons for this trend break. For the three first quarters of 2017, the "Big 3" have together produced some 688 million mt. This represents a growth of 1.5% year-on-year. Iron Ore Trade The growth in global iron ore trade during the super cycle was mainly linked to the growth in the steel sector within China. In more recent years, the growth has reflect- ed the changed composition of production, with a considerable increase in Chinese imports as a result of retired domestic capacity. This reflects the limitations of the poor quality (low Fe) iron ore within China. During 2016, Chinese iron ore pro- duction decreased 9.8 million mt, crude steel on the other hand only increased by 4.6 million mt, but Chinese imports of iron ore increased 73 million mt — clearly the stockpiles are growing. The continued Chinese interest in imported iron ore re- sulted in a global export increase by 5.2% in 2016. World total iron ore exports have almost doubled since 2006 and amounted to 1.513 billion mt in 2016 compared to 1.439 billion mt in 2015. Australia is by far the largest exporter of iron ore with a market share of 54% and the country has been able to profit the most from mine closures in China. During 2016, its exports continued to increase, reaching 814 million mt, an increase of World Iron Ore Production, 2014-2016 (million metric tons) Regions and Major Producing Countries 2014 2015 2016 Canada 0,0 44.2 0,0 46.0 0,0 48.7 United States 0,0 54.3 0,0 43.1 0,0 42.0 Brazil 0, 399.4 0, 422.5 0, 431.4 Venezuela 0,00 5.9 0,00 8.3 0,0 12.0 Subtotal Americas 0, 543.5 0, 557.8 0, 572.3 Sweden 0,0 28.2 0,0 24.8 0,0 26.9 CIS 0, 209.2 0, 202.0 0, 202.2 Subtotal, Europe 0, 246.2 0, 235.0 0, 234.6 Mauritania 0,0 13.3 0,0 11.6 0,0 13.5 South Africa 0,0 66.9 0,0 61.4 0,0 68.1 Subtotal, Africa 0, 109.8 0,0 82.3 0,0 87.4 India 0, 139.7 0, 142.5 0, 184.5 China* 0, 194.7 0, 123.5 0, 113.7 Subtotal, Asia 0, 418.9 0, 327.2 0, 358.2 Australia 0, 745.7 0, 811.2 0, 841.8 Subtotal, Oceania 0, 749.0 0, 814.4 0, 843.9 World Total 2,067.4 2,016.7 2,096.4 *Chinese production adjusted to represent tonnage in which iron content is roughly equal to average content in the rest of the world. Chinese ore production (unadjusted): 1,592.4 1,381.3 1,280.0 Source: UNCTAD, company reports, BGS, Statistical Bureaus

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