Multi-year Expert Meeting on
COMMODITIES AND DEVELOPMENT 23 - 25 March 2011, Geneva
Iron ore –still positive long term outlook
by
Mr. Magnus Ericsson Raw Materials Group, Sweden
"The views expressed are those of the author and do not necessarily reflect the views of UNCTAD"
Multi-year Expert Meeting on Commodities and Development
Iron ore – still positive long term outlook Magnus Ericsson/ Anton Löf
Selenium drawing: Kaianders Sempler.
Geneva, March 23 2011
UNCTAD Iron Ore Trust Fund • 1987, since 2002 with Raw Materials Group of Sweden. • Two annual publications – Iron Ore Market Review in June – Iron Ore Statistics in October • Financed by sales and contributions from Australia, Brazil, Canada, Sweden, the US. • Contact
[email protected] for information.
Raw Materials Group • Raw Materials Data, Metals/Coal/Iron Ore. • Strategy development: – Miners, equipment & service providers. • Mineral policy, investment promotion: – Governments, international organisations. • Pre-feasibility/Feasibility studies; market studies, price forecasts: – Banks, companies: juniors and majors.
Outline • • • • •
Steel production / iron ore demand Global iron ore production Nordic projects Price line Conclusions
Steel production Iron ore demand
Manganese drawing: Kaianders Sempler.
World and China crude steel production Mt
Source: World Steel Association
Crude steel growth pattern
Steel intensity per capita 1400
Kg/cap 1200 1000 800 600 400 200 0
China
South Korea
Japan
Taiwan
Chinese GDP and steel use Annual change (%)
China GDP / steel production Annual change (%)
Monthly steel production kt
Chinese steel production Mt 800
700 600 500 400 300 200 100 0 1980
1985
1990
1995
2000
2005
2010
2015
Indian steel stages Peak Point Point of Saturation Singapore
Japa
n EU
USA Point of Inflection
20 ina 00 -0 6
Ch
Trigger Point
Japan EU 15 Australia Singapore USA
India
China India 0
100
200
300
Per capita in KG
400
500
600
700
800
World crude steel production Mt 1,800
35.0%
1,400 30.0%
27.5%
1,000 25.0%
600
22.5%
1985
1990
1995
2000
2005
2010
2015
EAF Share of Production, %
32.5%
Steel production 2010-2010
Manganese drawing: Kaianders Sempler.
Global growth Chinese growth Rest of Asia Europe North America Japan
3.8 % 5.5 6.0 0.5 1.0 0.5
Global production
Vanadium drawing: Kaianders Sempler.
Global iron ore production
Source: Raw Materials Data Iron ore, 2010.
Iron ore production 2010 Mt
1830 Mt + 15 % China 319 Mt + 44 %
Sources: Raw Materials Data Iron ore; UNCTAD.
Top iron ore companies 2009 Company
Country
Prod Share of Mt total %
Production area
Metal
1 Vale
Brazil
255
16.0
Brazil
Div.
2 Rio Tinto
UK
172
10.8
Australia, Canada
Div.
3 BHP Billiton SAIL/NMDC 4 (State of India)
Australia
137
8.6
Australia, Brazil
Div.
India
55*
3.5
India
5 Anglo American
UK
43.8
2.8
South Africa, Brazil
6 ArcelorMittal
Luxembourg
37.7
2.4
Global
Fe/coal
7 Metalloinvest
Russia
35.5
2.2
Russia
Div.
8 Fortescue
Australia
34.9
2.2
Australia
9 System Capital
Ukraine
27.0
1.7
Ukraine
10 Cliffs
USA
24.9
1.5 US, Australia, Brazil
Note: Estimate.
Source: Raw Materials Group, Stockholm 2010.
061030 Anton Löf Source: Raw Materials Data, Stockholm 2005.
Fe Div.
Fe Fe/coal Fe
Global iron ore exports 2010 Mt
1068 Mt + 14 % Australia 402 Mt
Sources: Raw Materials Data Iron ore; UNCTAD.
Global iron ore imports 2010 China 612 Mt -3%
Chinese iron ore revisited Domestic Prod. need major mines
Prod. small mines
Total domestic prod.
Previous Production figure
Mt Fe
Mt Fe
Mt Fe
63 % Fe
63 % Fe Mt ore
2003
112
37.5
93.4
208
123
261
2004
115
35.1
99.5
214
146
310
2005
150
34.3
145
285
198
421
2006
186
34.2
190
356
276
588
2007
209
37.6
214
400
365
683
2008
171
43.4
159
321
366
824
2009
127
44.0
103
234
na
880
Source: Raw Materials Group 2010.
Chinese iron ore production/imports Mt
China iron ore production/import Gross volume
Project pipeline
Source: Raw Materials Data Iron ore, 2011.
Vertical integration % of total world iron ore production
2009 2008 2007 2006 2005
Market economies
CIS
China
Total
11 11 12 12 12
7 5 9 12 12
4 4 5 6 6
22 20 24 28 28
Source: Raw Materials Data Iron Ore, 2010.
Project pipeline 2010 - 2012 Total 685 Mt ”Big 3” 22 %
Juniors 27 %
Source: Raw Materials Group, Stockholm 2010.
Steel 22 %
Other miners 29 %
Future developments • “Big 3” controls large share of reserves/resources. • Juniors/new projects slightly larger share. • Steel companies’ share of new projects does not indicate increasing vertical integration. • Corporate concentration will increase but “Big 3” in a careful balancing act.
Nordic project pipeline Loca Reso/Resv % tion Mt Fe Northern Iron
Nor
Gruvberget +
459 (112)
Inv. MUSD
Start Cap. Mt/a
Life
32
OP
150 2009
2.9 30+
Swe
300 (na) ~60
OP
2010
2- 10
>8
Northland
S/F
252 (na)
32
OP
462 2012
5
28
Dannemora
Swe
54 (29)
38
UG
127 2011
2
13
Rana Gruber
Nor
250 (na)
34
UG
? 2011
1-2
14
Beowulf
Swe
140 (na)
39
OP
798
?
4.8
10
Grängesberg
Swe
83 (38)
57
UG
?
?
?
?
Nordic Iron Ore
Swe
Håksberg, Blötberget UG closed 1970s, cap 2 Mt
Tertiary Minerals, G4G Resources, and others early stage
Capital intensity Project
Total inv. MUSD
Mine & proc. Cap. int. MUSD m&p
Cap. int. ex pellet
Cap. int. Cap. int. ex pellet &trans total
(MUSD/Mt/a)
Amapá Bloom Lake KéMag Guelb el Aouj Sydvaranger Ruoutevare Kaunisvaara
763 587 3783 1650 150 798 462
311 353 1234 564 137 567 445
48 44 56 81 47 116 89
117 73 138 171 47 116 89
81 61 88 142 47 116 89
Source: Raw Materials Group 2010. Note: m&p mining and processing.
117 73 172 236 47 166 92
Operating costs Project
Product
Amapá Bloom Lake KéMag
Pellet feed Concentrate Pellet Concentrate Pellet Concentrate Concentrate Pellet feed
Guelb el Aouj Sydvaranger Ruoutevare Kaunisvaara
Source: Raw Materials Group.
Capacity Mt/a
6.5 8 15 7 7 2.9 4.8 5
Total opex USD/t
Opex mining USD/t
37.4 24.8 21.8
6.49 1.76 5.6
36.6 32.8 41.4 38.6
3.38 2.38 9.3 7.6
Nordic conclusions • • • •
European leaders: today and in the future. High quality ore and products. Long mining history – industry accepted by all. Local and regional authorities supportive – slowly also central bureaucrats in Stockholm, Helsinki and Oslo and perhaps even Brussels. • Operating & capital costs high but competitive.
Iron ore 2010 • Global production + 15 %. • Chinese production strong growth 319 Mt + 44 %. • Chinese swing producers: – Poor ore quality. – High costs. – Resources depleting.
Vanadium drawing: Kaianders Sempler.
• Chinese shake out delayed. • Slow growth of Chinese overseas mines.
Chinese foreign operations
Source: Raw Materials Data 2011.
061030
Anton Löf
Chinese foreign projects
061030
Anton Löf
Iron ore prices
Nickel drawing: Kaianders Sempler.
Iron ore prices in China Renminbi/t
Spot freight rates iron ore Brazil to China/Japan
Source: Drewry.
USD/t
Prices Kaunisvaara/China USc/dmtu (FOB Narvik) 250
200
150
Low High
100
50
0
30 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 20
Conclusions • Tight market next few years. • Projects delayed. • Chinese domination continues. • Nordic projects good prospects. • Prices will fall but stay above 75/80 USD/t. Selenium drawing: Kaianders Sempler.
Merci/ thank you! Raw Materials Group PO Box 3127 SE-169 03 Solna, Sweden Tel: +46-8-744 00 65
[email protected] UNCTAD
[email protected] Manganese drawing: Kaianders Sempler.
www.rmg.se