Global: Intensified iron ore fever

Related media January 15 news: The global iron ore and coal sector has attracted huge amounts of money, especially Australia. Exxaro of South Africa last week acquired a medium-sized iron ore mine at a 49% premium, and just as the company made its final purchase, global iron ore prices quickly dropped from a record high of US$175/ton last year to US$131.50. / Ton, last week the price was stable at around $145/ton.

Australia’s iron ore production accounts for about 40% of the global market. The country’s iron ore production will increase by 10% in the next 10 years, while at the same time it will double the global coal trading volume. In the next 10 years, the country plans to invest 115 billion U.S. dollars in infrastructure. According to Bloomberg, through these projects, by the year 2022, Australian cargo will reach 1.5 billion tons, and a new railway line of 3,700 kilometers will be established. BHP Billiton and Rio Tinto produced 500 million tons of iron ore last year in the Pilbara region of Western Australia, which accounts for 40% of the global market. In the next five years, the two giants plan to increase the annual production of iron ore in Pilbara by 538 million tons, which is more than half of the current output. In addition, as of 2016, the throughput of the Port of Heidelberg iron ore will increase from the current 199 million tons to 390 million tons. This will cause large fluctuations in iron ore production in the next five years, leading to a sharp drop in the price of iron ore.

Australia’s coal exports are equally alarming. AbbotPoint, a small-scale coal port, currently exports 15 million tons of coal every year. The Queensland government wants to increase the annual capacity of the port to 385 million tons. The demand for iron ore in China is huge. The country’s domestic iron ore mines produce 350 million tons of iron ore equivalent each year. The quality of iron ore produced in China is poor, and the cost of producing iron ore is very high, but the country’s huge demand for steel has caused steel mills to have no choice but to purchase and use such iron ore. Analysts said that unless Chinese mills choose to import iron ore instead of domestically produced iron ore, prices will not collapse.