IRON ORE
The Companies Iron Ore Supply
CVRD maintains its position as the undisputed world champion
Output increased mainly in the four major producing countries
iron ore producer in 2006 (Table 2). The three largest companies
Brazil, Australia, China and India. China had the fastest
together control 35%of the global market, a marginal decrease
expanding iron ore mining sector again in 2006 with a growth of
compared to the year before.
38%. Production reached a new peak at 276 Mt (at comparable
The level of concentration thus decreased somewhat in 2006. The
ore grades, total production is at a staggering 590 Mt). The
‘Big Three’ have not managed to increase their production at the
growth rate of India for 2006 was 13% (165 Mt), while that of
same rate as total world production, mainly because of the very fast
Australia was 6.8% (275 Mt) and Brazil’s iron ore production
expansion of small producers in India and China. The iron ore indus-
increased at 9% to reach 319 Mt. In the CIS, Kazakhstan's
try has been consolidating more or less continuously since the production increased by 13% and reached 19 Mt. Russia, at 104
1970s, but the process of consolidation has been largely completed Mt, recorded a growth of 7.4% and the Ukraine saw a growth of
(except in the CIS countries and China). Until the iron ore industries 6.6% (73 Mt).
in these countries start consolidating, there will be only marginal fur-
In Western Europe, production seems to have bottomed out;
ther increases in the level of concentration in the industry.
Swedish production is on the rise, Austrian production is stable
Meanwhile, the scene is set for an intensified Russian presence in iron
and in Bosnia-Herzegovina the production has just taken off.
ore projects, both inside and outside of Russia and the CIS countries.
However, total European production in 2006 was only 30 Mt.
The major companies – such as Evraz and Severstal – are most likely to
Output in Africa in 2006 increased by only 3.2% (to 57 Mt) and
make the first overseas investments in iron ore mining. In the Ukraine,
the African share of total world production is continuously
where the ownership situation was settled more recently than in declining. In North America, the difficult situation a few years ago
Russia, it will take several years to reach this point of development. has turned around completely and all American and Canadian
After a period of limited M&A activity during 2004-2005, the pos- operations are running at full speed, mining altogether 87 Mt.
sibility of an extended period of high prices – together with both
In 2006, global production of pellets was 349 Mt. This is the
mining and steel companies having coffers fully loaded with cash –
highest level ever, up 4.3% from 2005. World exports were 136
triggered another M&A wave in 2006 which has continued into
Mt, a decrease of 0.5% compared to 2005. The share of pellets
2007. This time focus has shifted from Australia to Brazil. It began
in total iron ore production in 2006 was 24%, in 1997 the figure
in early 2006 when CVRD acquired all the minority shares in Caemi
was 26.8%. A major factor behind this slow decrease in pellet
to a total value of over US$3.5 billion. CVRD also took over Rio Verde
production has been the fall in US iron ore output. However, this
for US$45 million.
trend seems to have stopped in recent years and there are some
In early 2007, the Brazilian mining tycoon Eike Batista’s new MMX signs of levelling out.
company clinched two major deals. The first was announced in
March when US based Cleveland-Cliffs completed a deal to buy Furthermore, the figures do not
30% of MMX’s Amapá project for US$133 million. In April, a second include incremental capacity increases
major deal was completed by Anglo American, taking 49% of MMX in existing mines, such as de-bottle-
Minas-Rio from MMX, and the second 30%share holder in MMX Rio necking, capacity increases due to reor-
Centennial Asset Particiapcoes. Anglo paid US$1.15 billion, which ganisations and avoiding closing down
makes the deal one of the largest ever in the iron ore sector. for maintenance etc., which we have
In spite of recent years’ attempts to create larger steel companies defined as “creep”.
through M&A, iron ore producers are still one step ahead of them.
However, the gap is steadily decreasing – both because of continued
A captive iron ore mine is now seen by some
M&A in the steel sector, and decreasing concentration in iron ore. steel companies as a hedge against
The trend to de-link iron ore mining from steel production (which
continued future price increases
was strong during the 1990s and early 2000s) had not even been
completed before a reverse trend could be observed. A captive iron In 2006, and even more pronounced
ore mine is now seen by some steel companies as a hedge against in early 2007, a new wave of expan-
continued future price increases. Arcelor Mittal is leading this new sion projects has been started. It has
development. Others are following Mittal’s example, including Essar become obvious that the period of
Steel in India and several Chinese and Russian steel companies. strong demand growth has lasted
Chilean steel producer CAP has even taken the consequences of the longer than anybody expected and
iron ore boom a stage further by discussing making iron ore its core that the first round of new projects
business and putting steel on the back seat. (together with all brownfield projects
that had been started) will not be suf-
The Projects ficient to keep up with ever growing
New iron ore mining capacity taken into operation in 2006 reached demand. The question marks and hes-
almost 70 Mt globally – considerably higher than in the preceding itations about a new generation of
year when only 30-40 Mt of new capacity was registered. These fig- greenfield projects that were felt in
ures do include known brownfield projects and exclude many small, the industry in late 2005 and early
locally owned projects (mostly in China and India) as well as those in 2006 have been replaced by a deter-
Brazil which are not announced in the same way as a project run by mination to go ahead with some of
a listed junior company or a major producer. the more long-term projects in West
COMMODITIES NOW SEPTEMBER 2007 89
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96