Quantcast
Last updated on April 19, 2014 at 21:20 EDT

Roskill: Who Can be Optimistic About the Iron Ore Market?

January 24, 2013

LONDON, January 24, 2013 /PRNewswire/ –

Whilst iron ore prices have recovered, not everyone is able to join the party.

2013 is shaping up to be an interesting year for iron ore. As prices hit US$150/t in
January – an 80% increase over the lows in September of last year – optimism briefly
returned to the market.

In the Pilbara, BHP Billiton’s Jimblebar expansion remains on track for first
production in the March 2013 quarter and the company expects to reach a production rate of
183Mt in FY2013, up 5% from 2012. Rio Tinto is targeting production of 290Mt by early
2014, compared to 253Mt in 2012. FMG has restarted the development of its Kings deposit
and remains committed to reach 155Mtpy production this year.

Meanwhile in Brazil, Vale is continuing the development of its S-11D expansion,
expected to add 90Mt or approximately 30% of its current capacity by 2016. And although
Anglo American’s Minas Rio project is now commonly referred to as the world’s most
expensive iron ore, production is nonetheless set to commence in 2015, to add an initial
capacity of 26.5Mtpy to the market.

Yet in contrast to the scale of these expansions by the leading players, juniors are
struggling to get back on their feet. Following the 2012 slump in prices, projects that
depend on speculative investment are failing to compete with those able to rely on a
stable cash-flow. The situation appears unlikely to improve, as Roskill forecasts that
prices may fall to US$100/t by 2015 and US$90/t by 2016. On the back of lower demand
growth forecasts and decreased concern over access to supplies, announcements of new joint
ventures with steel companies have also diminished.

As the prospects of projects are often linked, even promising assets are dragged down
by the misfortunes of marginal players. For example, in the Pilbara the projects by Atlas
Iron, Brocknam Resources, Hancock Prospecting and other entrants depend on the
construction of a fourth Pilbara rail line, but with lower prices and competing expansions
from established companies, such a rail line may not secure the usage to render it
economic.

In Africa, Rio Tinto and Vale have shifted their investment priorities away from their
respective Simandou projects in Guinea. As the vision of this area turning into the next
Pilbara depends on sizeable investments in infrastructure, decreased enthusiasm among
these iron ore majors spells bad news for the junior companies that have seeking to invest
in the region’s future.

Thus, while the top players are expanding their capacity, the fortunes of iron ore
juniors have reversed. In February 2011, when prices reached US$200/t, the industry
appeared set for increasing diversification. Now, FMG, BHP Billiton and Rio Tinto appear
on track to account for over 75% of capacity expansions in the Pilbara over the next five
years.

The story is much the same in Brazil and beyond, and further consolidation is the
likely path of the future. A great shakeout among the junior mining companies appears
probable.

For a more detailed overview of current projects, forecasts for demand, supply and
prices and an analysis of the trends and dynamics driving the industry, see Iron Ore
Market Outlook to 2020 from Roskill Information Services Ltd, 54 Russell Road, London SW19
1QL UK. Tel: +44-(0)20-8417-0087. Fax +44-(0)20-8417-1308 Email: info@roskill.co.uk
Web: http://www.roskill.com

Note to editors

Roskill is regarded as one of the leading global sources of industrial minerals, minor
metals and steel alloys market research. Roskill has an international presence with
analysts based in the UK, Canada and China, along with an expert network of industry
consultants and contacts around the world.

Roskill Information Services Ltd.

Approachable.Independent.Expert.

        For further information on this report, please contact
        Judith Chegwidden
        jchegwidden@roskill.co.uk
        or call +44-(0)20-8417-0087

SOURCE Roskill Information Services


Source: PR Newswire