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

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

  PR Newswire

  LONDON, 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 contactJudith Chegwidden
jchegwidden@roskill.co.uk or call +44-(0)20-8417-0087
 
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