Global iron-ore demand set to double

20th April 2012
Mining Weekly
Global iron-ore demand is set to double to around 3.5-billion tons a year by 2030, with recent investigations by data analysts Raw Materials Group (RMG) identifying two major players in the current iron-ore market, namely China and India.

RMG chairperson Professor Magnus Ericsson explored the role of China and India in the market in his presentation at the fifteenth Annual Global Iron Ore & Steel Forecast Conference, in March, held in Perth, Australia.

His presentation, ‘Chinese and Indian Iron-Ore Production – Determining the World Market Balance’, defended Chinese investments in foreign resource projects, stating that Chinese investment only accounts for 1% of all the minerals produced around the world.

“Australia and Canada account for much higher ownership in foreign projects, but no one is claiming that they are taking over the supply of commodities,” said Ericsson.

He also noted that, while China had been the world’s largest exploration spender, it had not yielded great results. He said China continued to face hurdles regarding its target to gain con- trol of 50% of its imports by 2015.

“[China] will not reach that goal – it is completely impos- sible,” he said, citing the country’s inexperience with large-scale openpit mining as one of the reasons why China is finding it difficult to expand internationally.

“Chinese mines are often small and deep, so there is no Chinese model to use in whatever country is of interest,” he said, adding that cultural problems and the suspicion many African countries have about Chinese interest is also a factor making the country’s expansion into Africa a difficult process.

However, Ericsson predicted that China is likely to explore for more iron-ore outside the country in the future, because of its dropping iron-ore grades, which run between 20% and 25% iron.

He concluded that Chinese interest in global exploration would increase in the future with countries that did not perceive China as a threat. “So far, the interest has been to acquire deposits that are already at a fairly advanced stage, but I think we will see Chinese interest in more greenfield-type exploration into the future,” he said.

Meanwhile, Ericsson identified internal politics between steel producers and iron-ore miners over export control as India’s big- gest problem.

Research by RMG has revealed that iron-ore exports may see a decline on the subcontinent, as a result of the formidable growth planned by Indian steel companies.

Iron-ore miners in India claim that there are enough resources for both increased domestic steel production and exports, but steel lobbyists foresee a different outcome.

Ericsson said steel producers seem to be winning that tug-of-war with regard to export restric- tion at the moment, but he was unsure how long this would last, questioning India’s ability to meet iron-ore demand in the next 20 years.

He mentioned that increasing iron-ore volumes would prove difficult, considering the sinking ore grades of iron in India as well.

“Our conclusion is that the Indian problems are serious and to expect them to lift iron-ore production to meet demand is a bit too optimistic,” said Ericsson, adding that imports into the country would probably not start until the next decade.

Further, he pointed out the challenges India faced logistic- ally. He said the red tape around railway transport, ports and logistics, in general, prevented India from being able to achieve a promising growth rate.

“The high alumina content of its ores also presents problems in blast furnaces, not to mention the beneficiation that would be required on its magnetite ores.”

Ericsson concluded his presentation by saying the demand outlook for iron-ore remained strong for now and said, while China had been driving demand, India would later take over.

He predicts that iron-ore prices will fall, but will remain on a high level. He maintains one of the biggest problems faced by China is its iron-ore and copper import dependence.