Iron Ore
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[edit] Overview
Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in colour from dark grey, bright yellow, deep purple, to rusty red.
[edit] General uses
Although iron has many specific uses and is refined into wrought iron and cast iron for pipes, fenses, fittings, chains, engine blocks and other items, its main use is in the production of steel. Steel has several desirable properties, making it the main structural metal in engineering and building projects and accounts for 90% of all metal used each year. Several types of steel exist containing varying amounts of iron alloyed either with other metals (chromium, manganese, nickel, molybdenum) or carbon to increase strength and durability. [1]
[edit] Pricing structure
During the export of iron ore from Brazil to European countries, the prices of fines (grain like iron ore) was around 83.40 USD per ton as of 2007. The reduction pellets of iron ore were around 129.76 USD per ton while the furnace pellets amounted to around 121.08 USD per ton. LME (London Metal Exchange) is expected to trade in steel billets on 28th April 2008. [2]
[edit] Current consumption trends
In the US most of the iron ore mined is used to make steel. On an average, the global consumption of iron ore shoots up by almost 10% every single year. [3] The chief countries which seem to heavily depend on iron ore are Japan, China, the EU as well as Korea. China remains the largest contender for the consumption of iron ore. In 2006, it was estimated to have produced almost 588 million tonnes along with an average yearly growth of around 38%.[4]
China’s imports of iron-ore from India have been slowing dramatically, owing to supply constraints and consequently increased by only 4% in 2007. Nearly a quarter of Chinese iron-ore is imported from neighbouring India.[5]
[edit] Price forecasts
- Credit Suisse, on Thursday, raised its forecast for a price increase this year to 55%, up from an earlier prediction of 35%, according to a report by analysts Roger Downey, Ivan Fadel, and Leonardo Correa. They said iron-ore demand was 25 metric tonne short of supply in 2007, the tightest market since 2004-2005, when prices rose 72%. [6]
- Lehmann brothers believes there will be a price increase "significantly above" market expectations due to a long list of noncyclical factors, including depletion of high-quality resources in low-risk regions of the world, geopolitical challenges, more stringent regulations, tougher permitting review processes and shortages of labour, equipment, water, energy and other raw materials.Marginal costs of production, which in this cycle have increased by more than 100%, are likely to support the prices of other commodities[7]
- Morgan Stanley has forecast a 50% rise in iron ore prices for 2008 "to reflect an exceptionally tight market." Merrill Lynch and Ｍacquarie bank have made similar projections, while JPMorgan predicts a rise of 25-30%. Mining companies are struggling to increase iron ore output in Australia, the world's biggest exporter, as the quality of Chinese iron ore has not improved. [8]
- UBS - According to the latest research from investment bank UBS, iron ore prices are expected to rise by at least 25 per cent for 2008 as demand outpaces global supply.[9]
- Goldman Sachs JB Were have prompted market experts to increase their forecast for a benchmark iron ore price increase to 30%. Previously, market observers were forecasting +9%.
- RBC Capital Markets has also raised its iron ore price forecast, according to a Bloomberg news agency report. It thinks contract prices will go up by as much as 35% in 2008, and the market may remain tight for two years, because of rising consumption and limited supplies.[10]
- Citigroup predicts Iron Ore price to rise 30% in 2009.[11]
- Merrill Lynch:[12]
- 2008 + 71%
- 2009 + 14-20%
- 2010 - 4%
- 2011 - 20%
- 2012 - 25%
- 2013 - 20%
- 2014 - 20%
[edit] Major producers
The International Iron and Steel Institute (IISI) reports that it typically takes about 1,5 t of iron-ore, and about 450 kg of coke, to produce one ton of pig iron, the raw iron that comes out of a blast furnace.
Most iron-ore is extracted in the opencast mines of Australia and Brazil, carried to dedicated ports by rail, and then shipped to steel plants in Asia and Europe.
Iron-ore has become an investor’s choice and the seaborne iron-ore market is benefiting from a combination of very strong demand growth, particularly in China, and a slowdown in supply growth from India and the domestic Chinese mines.
Exports from Brazil and Australia have also failed to meet expectations owing to weather- related problems and infrastructure constraints, adds Lehman.
The rate of Chinese iron-ore production is slowing, though still up by about 20% year-on-year from January to November, in 2007. Lehman states that after peaking at almost 68-million tons in June 2007, the country’s monthly iron-ore production has been relatively stable between 60-million and 65-million tons a month.[13]
Brazil remains one of the largest owners of iron ore mines across the globe. Following closely is Australia which again produces a substantial quantity of iron ore. Quite a few iron ore mines are also located in countries like Canada, New Zealand and US. CVRD is one of the largest producers of iron ore in the world and is based out of Brazil. [14]
[edit] Exports of Iron Ore from Major Exporters 2007-2008
| Country | 2008 Jan-Mar | 2007 Jan-Mar | % YoY Change | Change mt |
|---|---|---|---|---|
| Brazil | 65.82 | 56.77 | 15.9% | 9.05 |
| Australia (wet basis) | 78.40 | 62.40 | 26.4% | 16.37 |
| India | 36.02 | 28.08 | 28.3% | 7.94 |
| South Africa | 8.99 | 7.75 | 15.9% | 1.23 |
| Sweden | 5.79 | 4.62 | 25.5% | 1.18 |
| Canada (ex USA) | 5.26 | 3.63 | 44.9% | 1.63 |
| Chile/Peru | 1.80 | 2.07 | -13.0% | -0.27 |
| Other* | 10.61 | 6.22 | 70.5% | 4.39 |
| Total Above | 212.68 | 171.18 | 24.2% | 45.51 |
- Based on Chinese import from smaller countries not listed above
Source: Macquarie Research
[edit] China’s recent rise
As of 2005, China has been increasing its domestic production of lower grade iron ore by almost 30%[15] . It has been importing the higher grade ores from countries like Brazil and Australia and from 2004-2005, there has been a steady climb of around 20%[16] . All these statistics indicate that China’s demand of iron ore is expected to climb further and it can mean only good news for the expansion of the US iron ore mining industry.
[edit] Freight
The super carriers required to ship Iron Ore across the sea consume approximately 1 gallon of oil fuel for each 6 metres they travel.
[edit] External References
- ↑ http://www.basemetals.com/html/irinfo.htm Base Metals
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/iron_ore/feoremcs07.pdf
- ↑ http://www.arabsteel.info/total/Long_News_Total_e.asp?ID=395
- ↑ http://en.wikipedia.org/wiki/Iron_ore
- ↑ http://www.miningweekly.co.za/article.php?a_id=127058
- ↑ http://www.financialexpress.com/news/Iron-ore-price-to-rise-at-least-40-in-2008/263116/ Iron ore price to rise at least 40% in 2008
- ↑ Iron-ore prices to exceed market expectation "significantly", says Lehmann, Martin Creamer, 25 Jan 08
- ↑ http://www.chinaeconomicreview.com/dailybriefing/2007_10_25/Iron_ore_prices_may_increase_up_50.html Iron ore prices may increase up 50% Commodities
- ↑ http://www.smh.com.au/news/BUSINESS/UBS-tips-25-hike-in-iron-ore-price/2007/07/10/1183833491196.html UBS tips 25% hike in iron ore price
- ↑ http://www.financialexpress.com/news/Market-observers-project-35-hike-in-iron-ore-prices/214113/ Market observers project 35% hike in iron ore prices
- ↑ http://www.bloomberg.com/apps/news?pid=20601081&sid=a75c2kkHBO8Q&refer=australia
- ↑ http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=967404B9-1871-E587-E1A282FFD1E754DD
- ↑ http://www.miningweekly.co.za/article.php?a_id=127058 Consumption of iron ore skyrocketing
- ↑ http://www.steelguru.com/selectednews/index/2007/004/030/archives.html
- ↑ http://www.ame.com.au/companies/fe/companies.htm
- ↑ http://minerals.usgs.gov/minerals/pubs/commodity/iron_ore/feoremcs07.pdf
