A Ten Year Strategic Outlook for the Global Iron Ore … · A Ten Year Strategic Outlook for the Global Iron Ore Industry ... Under the 12th Chinese five year plan, ... BSG Resources

A Ten Year Strategic Outlook for the

Global Iron Ore Industry

Part 1: A Ten Year Strategic Outlook for theGlobal Iron Ore Industryl Latest production and export data for 70 plus global miningcompanies

l Over 260 forthcoming projects are assessed and the latestupdates provided

l Demand and supply analysis and forecasts for the threemain iron ore products used in steel making – lump, finesand pellets

l Detailed insights into key issues affecting the global iron ore industry

l Comprehensive outlook for spot and contract iron ore prices

New andUpdated

Part 2: Dynamic Demand, Supply and PriceModel for the Global Iron Ore IndustryPLUS, this brand new research study also includes theoption to purchase the dynamic demand, supply and priceforecast model for the global iron ore industry:

l Unique opportunity to own a fully interactive and dynamicforecast model

l Conduct sensitivity analysis on demand, supply and priceforecasts for lumps, pellets and fines

l Allows you to model economic and supply shockscenarios – alter parameters and run “what-if” scenariosfor the global iron ore industry

“A Ten Year Strategic Outlook for the GlobalIron Ore Industry contains very insightfulinformation on the global iron ore industry.”Shannon Hore, Vice President Procurement & Logistics, Emirates Steel

Part 1: A Ten Year Strategic Outlook for the Global Iron Ore Industry

lWhat will be the marketoutlook for the iron oremarket?

lWhat is the outlook forChinese iron demand overthe next ten years?

lWhere are iron ore pricesfor pellets, fines and lumpheading over the next ten years?

lHow quickly will additionalsupply from Australia,Brazil and Guinea emerge?

lHow long will the iron oremarket be characterised byincreasing Chinesedemand pushing againstconstrained global supply?

The power struggle between the Chinese and big three miners for supplydominance is set to only intensify.Moreover, the emergence of Africa andinfrastructural constraints facing theindustry – most notably in Australia’sMidwest region – means that this newstudy is never more topical as it is today.How will this impact on iron ore pricesand what will this mean to globalsteelmakers over the next 5-10 years?

Collectively the world’s developed economies havebeen a major drag on global growth during much of2012. Over the outlook period (2013-2021) they arelikely to be characterised by lacklustre performance asdebt deleveraging persists. In contrast, the emergingmarket economies have considerable scope to easefiscal policy to bolster global recovery should theoutlook deteriorate.

Annual global steel output growth decelerated by 3.8%to 3% (1,557m tonnes) in 2012. In Europe capacitywas reduced, while in Asia stockpiles swelled andproducer margins shrank. Although higher demand isexpected over the forecast period, surplus steelcapacity presents a headwind for steel prices andassociated raw material input costs.

Under the 12th Chinese five year plan, the country’ssteel industry will aim to improve its industrialconcentration ratio and thereby increase its disciplinewhen enacting short-term buying strikes to drive downraw material input costs. In addition the Chineseremain committed to foreign iron ore resourceinvestments, to help reduce their dependency on thebig three suppliers (BHP, Rio Tinto and Vale). However,the successes of their efforts are likely to be limitedgiven their relative size among other market producers.Moreover as Chinese economic growth gears down,global demand growth for iron ore will likely settle at amore modest compounded average annual rate.

As global iron ore supply increases more rapidly thandemand in the medium-term, China’s low grade,uneconomical mines are likely to close, weighing downon Chinese domestic production levels. In contrastChinese demand will rise by 36.4% from 2012 to1,495m tonnes by 2021. To offset the Chinese supplygap significant exports are expected from India as wellas from the big three, who are expected to retain theirdominance in the industry, despite Chinese effortsoverseas to dilute their concentration.

Part 1 consists of Metal Bulletin Research’s (MBR)independent written study, A Ten Year StrategicOutlook for the Global Iron Ore Industry, whichexamines, among other topics, what the future trendsare for iron ore prices and the future strategic plans theiron ore majors are set to adopt.

This new and independentstudy is designed to helpyou examine the currentvolatility in the iron oremarket, and to plan yourstrategy through the next10 years with our forecastsfor supply, demand, tradeand prices for the majortypes of iron ore – pellets,DR fines and lump ore.

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New andUpdated

Part 1: Study

“I would recommend Metal Bulletin Research as a unique provider ofsteel and its raw materials market analysis and forecasts” Michael Amez, Manager, A.T.Kearney, USA

www.metalbulletinresearch.com

Key issues examined in this study include:

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Iron ore market likely to come under pressure assupply growth outpaces that of demand (m tonnes)

Demand for all iron ore products expected to grow (m tonnes)

Source: Metal Bulletin Research*Full data and forecasts available in the study

Source: Metal Bulletin Research*Full data and forecasts available in the study

m tonnes

3000

2500

2000

1500

1000

500

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

2018f

2019f

2020f

2021f

m tonnes

3000

2500

2000

1500

1000

500

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

2018f

2019f

2020f

2021f

Steel Production Iron Ore Demand Iron Ore Production Lump Sinter feed/DR fines Pellet

l This study gives the latest production and export data for 70 plusglobal mining companies, including historical and 10 year forecastdata on by-mine production

lOver 260 forthcoming projects are assessed and the latest updatesprovided. Which projects are likely to be commissioned on time,delayed, or cancelled altogether?

l Demand and supply analysis and forecasts for the three main iron oreproducts used in steel making – lump, fines and pellets using MBR’s sophisticated in-house model

l Detailed insight into key issues such as:• The changing patterns in iron ore demand• Industry consolidation • Freight issues• Pricing mechanisms• Government regulations and carbon taxes• Trends in mining operating costs• Geopolitical issues in Africa• Quantitative supply/demand, price sensitivity analysis(multiple real world scenarios)

l The outlook for spot and contract iron ore prices. This study willuniquely aim to determine, and measure, how much any future ironore price rise could be down to a “degree of monopolisation” on thepart of iron ore miners and how much will be due to the actual supplyand demand fundamentals

l Extensive analysis of new African projects: existing mines andidentified projects in Cameroon, Cote d’Ivoire, Gabon, Guinea, Liberia,Nigeria, Senegal and Sierra Leone to include:• details of technology, technical factors such as ore type andgrade, product mix and product grades, equipment, operatingprocedures and transport

• estimates of operating costs per tonne by main cost item for eachtype of product (lump ore, sinter fines, pellet fines and pellets asappropriate)

• estimates of capital costs for each main type of asset (minedevelopment, mining equipment, beneficiation plant, pellet plant,transport such as railway, pipeline, ports, etc.

• estimates of capital charges per tonne for each type of product

Key company supply profiles detailed: Examples include:

BHP Billiton Australia

Rio Tinto Australia

Fortescue Metals Group Australia

Atlas Iron Australia

Western Plains Resources Australia

BC Iron Australia

Cazaly Resources Australia

Centrex Metals Australia

Atlas Iron (FerrAus) Australia

Atlas Iron (Giralia) Australia

IMX Resources Australia

Cape Lambert ltd Australia

Mount Gibson Australia

Iron Clad Mining Australia

Gindalbie Metals Australia

Golden West Resources Australia

Grange Resources Australia

Mineral Resources Australia

Forge Resources (previously Atlas Iron (Aurox Resources) Australia

Sinosteel MidWest Australia

Crossland Resources (50% stake previously held by Murchison Metals) Australia

Arrium (OneSteel) Australia

Cliffs Asia Pacific Iron Ore Holdings Australia

Territory Resources (Noble Group) Australia

Citic Pacific Australia

Australasian Australia

CSN Brazil

Vale Brazil

Rio Tinto Brasil Brazil

Mineraço˜es Brasileiras Reunidas Brazil

Crusader Resources Brazil

MMX Brazil

Anglo Ferrous Brazil (Anglo American) Brazil

Samarco Brazil

BML Brazil

MHAG Brazil

Ferrous Resources Brazil

ArcelorMittal Serra Azul & Andrade Brazil

London Mining Brazil

IOCC Canada

ArcelorMittal Mines of Canada Canada

Consolidated Thompson (Cliffs) Canada

New Millennium Canada

Wabush (Cliffs) Canada

Anglesey Mining Canada

Cliffs Natural Resources (Cleveland Cliffs) USA

GIIC (Bahrain) Bahrain

Rio Tinto (Simandou) Guinea

BSG Resources Guinea Guinea

Bellzone Guinea

Sesa Goa India

ESSAR India

ISPAT (JSW Ispat) India

SAIL India

NMDC India

CMP Chile

Admiralty Resources Chile

JSW & Minera Santa Fe (JV) Chile

Vallenar Iron Company - Australis Mining (CMSB) Chile

SNIM Mauritania

Xstrata (Sphere Mineral (Guelb el Aouj & Askaf) Mauritania

Shougang Hierro Peru Peru

Cardero Resources Corporation Peru

Minera Sierra Grande/China Metallurgical Group Argentina

Assmang South Africa

Kumba Iron Ore South Africa

Palabora Mining South Africa

CVG Ferrominera Orinoco Venezuela

LKAB Sweden

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Contents (Part 1)Call our hotline on +44 (0) 20 7779 8000 or visit www.metalbulletinresearch.com for a detailed synopsis of each chapter of the study

1 Executive summary

2 The macroeconomicenvironment 2012-20212.1 The global economy

2.2 China

2.3 Asia

2.4 Middle East and Africa

2.5 Americas

2.6 Western Europe

2.7 Eastern Europe and Russia

2.8 Economic case statistics2.8.1 Base case economic

statistics2.8.2 Best case economic

statistics2.8.3 Worst case economic

statistics2.8.4 Exceptional worst case

economic statistics

3 Crude steel production3.1 Overview

3.2 Outlook

3.3 Environmental considerations

4 BFI and DRI/HBI production4.1 Overview

4.2 Outlook

5 Iron ore pellets and feed5.1 Pellet demand overview

5.2 Pellet demand outlook

5.3 Pellet supply overview

5.4 Pellet supply outlook

5.5 Capacity additions

5.6 Global pellet trade

5.7 Global pellet feed trade

6 Iron ore lump6.1 Lump demand overview and outlook

6.2 Lump supply overview and outlook

6.3 Global trade

7 Iron ore sinter, sinter feedand DRI/HBI fines7.1 Sinter and DRI/HBI fines demand

overview and outlook

7.2 Sinter feed and DRI/HBI fines supplyoverview and outlook

7.3 Global trade

8 Iron ore prices andproduction costs8.1 Introduction

8.2 Market balance

8.3 Scenarios8.3.1 Best case Scenario8.3.2 Worst case scenario8.3.3 Exceptional worst case

scenario8.3.4 Increase of 2% in global

supply relative to theeconomic base case

8.3.5 Decrease of 2% in globalsupply relative to theeconomic base case

8.4 Long-term price projections

9 Iron ore company andproject profiles

10 Appendix A: Supply profiles

11 Appendix B: Review tables

12 Appendix C: Iron ore mineoperating cost analysis

13 Appendix D: Extensive analysis of newAfrican projects:Existing mines and identified projects inCameroon, Cote d’Ivoire, Gabon, Guinea,Liberia, Nigeria, Senegal and Sierra Leoneto include:

• details of technology, technical factorssuch as ore type and grade, product mixand product grades, equipment,operating procedures and transport

• estimates of operating costs per tonne bymain cost item for each type of product(lump ore, sinter fines, pellet fines andpellets as appropriate)

• estimates of capital costs for each maintype of asset (mine development, miningequipment, beneficiation plant, pelletplant, transport such as railway, pipeline,ports, etc.

• estimates of capital charges per tonne foreach type of product

www.metalbulletinresearch.com

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Part 2: Dynamic Demand, Supply and PriceModel for the Global Iron Ore Industry

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Part 2: Dynamic ModelDynamic forecast model in MS Excel

l Fully interactive and dynamic forecast model directly accessiblein MS Excel

l Unique occasion to access MBR’s in-house model that allows us to formulate and drive all our research and market forecastswe present

l Complete demand, supply and price forecast model for lump,pellets and fines

l Allows the user to model economic and supply shock scenarios

Conduct sensitivity and market simulations on theglobal iron ore industry

This will uniquely allow your company to manipulate and/or update our data with theoption of changing specific parameters, modelling economic scenarios andintroducing new supply.

Part 1 of the service will present results and analysis from our base case scenario as generated by our unique anddynamic in-house model.

However, in Part 2, we make also available MBR’s complete in-house dynamic model which comes as an additionalservice to the written study or as a stand-alone basis.

MBR is offering you the opportunity to our entire in-house model to provide a fully transparent view of themethodology MBR uses for our forecasts and market analysis. This will allow you to take confidence when makingsubstantial investment decisions as well as update any change in parameters we have assumed in the model.

Source: Metal Bulletin Research

GDP Growth

Industrial Production

Crude Steel

Production and export data for 67 major mining companies across the globe

Prod

uctio

n

Pellets

Lump

Sinter Feed/DRFines

Pellet feed

Expo

rts

Global agg

lomerate and unagglom

erate iro

nore trade data (excluding iro

n pyrites)

Price

Pellets

Lump

Sinter

Pellets

Lump

Sinter

DR fines

Pellets

Lump

Sinter Feed/DRFines

Pellet feed

Total iron ore supp

lyTotal iron ore demand

Metal Bulletin Research Iron Ore Mod

el

}Sinter

Sinter feed

BFI production

DRI / HBI production

Consumption Balance

Production

}

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