Iron Ore Industry to Remain Turbulent Through to 2020

            Iron Ore Industry to Remain Turbulent Through to 2020

  PR Newswire

  LONDON, November 14, 2012

LONDON, November 14, 2012 /PRNewswire/ --

With the disruption of supplies from India, concerns over slowing economic
growth in China, and the effects of large stockpiles forcing the price of iron
ore through a series of supposed "price floors", the iron ore industry has
faced a turbulent time during 2011 and 2012. While the price of iron ore
appears set to make a partial recovery, Roskill's new report offers a deeper
level of insight into the dynamics driving the market, and offers a market
outlook to 2020.

Increased concentration, vertical integration and foreign ownership is likely

From 2006 to 2011, the promise of a high return on investment led to a
decrease in the concentration of corporate control of seaborne trade in iron
ore. During this period, the share of seaborne trade controlled by Rio Tinto,
BHP Billiton and Vale (the "Big Three") fell to 57.3% of the world total. This
trend is expected to reverse to 2020, as the limited availability of capital
will make securing project financing increasingly difficult for emerging
producers. Much of the increase in capacity is expected to come from capacity
expansions in Australia and Brazil and from projects backed by leading steel
producers seeking to secure future supply.

New capacity will exceed growth in demand and force high-cost operations out
of the market

Downward revisions in the long-term outlook for iron ore demand and prices are
likely to lead to the delay, suspension or cancellation of a large number of
projects. Nonetheless, Roskill estimates that 425Mtpy of nameplate capacity
will be added from the middle of 2012 to the end of 2014 and that capacity
additions will continue to exceed 100Mtpy through to 2020. These additions are
likely to exceed demand growth and mostly represent low to medium-cost
operations. Consequently, producers at the higher end of the cost curve -
particularly those in China - will gradually find themselves unable to compete
in the open market.

Demand for steel is expected to grow at a slower rate

In 2012, a destocking phase among steel producers depressed demand for iron
ore and the World Steel Association expects apparent consumption of finished
steel products to grow by only 2.1% in 2012, down from 6.2% in 2011. A partial
recovery appears likely, as the construction sector in China and increased
infrastructure spending will support growth in demand. During the period to
2020, however, rising demand from other emerging nations is unlikely to fully
offset the slowing pace of growth in the intensity of steel use in China, as
this country approaches a peak in per capita steel consumption. 

Roskill expects growth in apparent crude steel use to average 2.9%py from 2012
to 2020. Owing to the ongoing shift of steel production to countries with a
higher use of iron ore per unit of steel, Roskill forecasts that demand for
iron ore, at 3.1%py, will marginally outpace steel demand, despite a relative
increase in the use of scrap metal.

Prices are likely to remain volatile

Uncertainty over the Eurozone affects the iron ore industry through its effect
on demand, as well as on the reduced availability and higher cost of capital.
Revisions of figures on Chinese growth targets and performance are likely to
result in further short-term peaks and troughs, although much of the
adjustment to a more realistic outlook has already taken place - albeit some
rebound from excessive and unwarranted pessimism may be expected. Other risk
factors include growing resource nationalism, particularly in Africa, highly
unpredictable energy costs, rising labour costs, and the fate of the Indian
mining industry following the mining bans in Goa and Karnataka states.

Following the slump in prices from June to September 2012, Roskill expects
prices to remain above US$120/t cfr for 63.5% Fe content Indian fines until
the end of 2014, while a restocking phase may push prices towards US$135/t
during 2013, although large fluctuations are not unlikely. As new capacity
comes on-stream, the industry's price floor will gradually drop and Roskill
expects that the US$100/t price level will be repeatedly tested and eventually
broken towards 2015. In its baseline scenario, and adjusting for inflation,
Roskill expects that prices may trend towards US$85 to US$95/t during 2016 to
2020. 

The report contains 350 pages, 182 tables and 63 figures.It provides a
detailed view of the iron ore industry, with subsections on resources, world
production, leading mining and processing companies, world consumption, demand
by end-use sector, international trade and prices. It provides forecasts of
supply/demand balance and prices. 

'Iron Ore: Market Outlook to 2020, 7th Edition, 2012' is available at £4,500 /
US$7,500 / €5,900 from Roskill Information Services Ltd, 54 Russell Road,
London SW19 1QL ENGLAND. Tel: +44(0)20-8417-0087. Fax +44(0)20-8417-1308. Web:
http://www.roskill.com/iron-ore .

Roskill Information Services Ltd.

Approachable. Independent. Expert.

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.

For further information on this report, please contact Judith Chegwidden (
jchegwidden@roskill.co.uk ).To be added to our press distribution list please
contact Isobel Jarvis ( isobel@roskill.co.uk )