Recommended
More Related Content
What's hot
What's hot (20)
Similar to australia iron ore market
Similar to australia iron ore market (20)
Recently uploaded
Recently uploaded (20)
australia iron ore market
- 1. SMU Maritime Merchant's Society Club Know-Thy-Commodity Iron Ore By: Alessandra, Arjun, Cindy, Ganesh, Girish, Marcus, Samuel
- 2. Agenda • Introduction • Mining • Import & Export • Value Chain • Transportation • Sales and Marketing • Trade Flows • Sustainability • Outlook
- 3. INTRODUCTION
- 4. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Introduction to Iron Ore Use of Iron Ore Historic What are Iron Ores? ● Iron has been used since 5 thousand years ago ● Trading of iron ore has been done since 2 thousand years ago ● Large scale mining and trading started only in the 19th century ● Primary use of Iron Ore is to produce Steel (98%). ● Rocks and minerals from which metallic iron can be extracted ● Found in Igneous, Metamorphic (transformed), or Sedimentary rocks Construction Transportation Household Appliances Energy Generation
- 5. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Types of Iron Ore Magnetite Fe3O4 Hematite Fe2O3 Goethite FeO(OH) • Contains 72.4% of Iron • Strong magnetic properties • Contains 69.9% of Iron • No magnetic properties Limonite FeO(OH)·n (H2O) Siderite FeCO3 Others: “Direct Shipping Ore” “Natural Ore” 3 Main Forms of Iron Ore
- 6. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Occurrence of Iron Ore Bedded Channel iron deposits Iron sand Detrital
- 7. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Exploration Methods Geographical Mapping Aerial Photography Geophysics Drilling Magnetic Gravimetric
- 8. MINING
- 9. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Types of mining Surface (pit) • Relatively cheap; lower operating costs and smaller crew size • Ability to mine selectively for certain grades of ore Underground • Not very common for iron ore. Although there are still some present in Sweden & America • Different methods of underground mining (e.g., room & pillar mining Underwater • Not relevant to iron ore for now • Very costly; crew and equipment
- 10. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Costs Involved Capital Investment in Infrastructure Upfront Capital Costs for Mines Operating Costs • Rail Lines • Heavy Machinery • Crushing System • Magnetic Separation • Depends on type of iron ore • Ranges from US$160/ metric ton to US$240/ metric ton Metric Amount (in millions) Key Ratio (%) Net Income before Tax 27927 500.4 Admin Cost 2605.9 1.2 Total Operating Expense 156461.1 75
- 11. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Projects/ Expansion Company Location Country Project Type Start up Capacity (million mt/y) Samarco Vale/BHP Minas Gerais Brazil Restart Q4 2020 8 Fabrica Vale South System Brazil Restart Q2 2021 4 South Flank BHP Pilbara Australia New Q2 2021 80 Vargem Grande Vale South System Brazil Restart Q3 2021 10 Eliwana FMG Pilbara Australia New Q4 2021 30 Robe River JV Rio Tinto Pilbara Australia New 2021 n/a Western Turner Syncline, Phase 2 Rio Tinto Pilbara Australia New 2021 n/a Dudai-Darri (Phase 1) Rio Tinto Pilbara Australia New Q1 2022 43 Gudai-Darri (Phase 2) Rio Tinto Pilbara Australia Expansion n/a 27 Recent Exploration Projects Source: S&P Global Platts
- 12. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Projects/ Expansion Company Location Country Project Type Start up Capacity (million mt/y) Brucutu Vale Southeastern System Brazil Restart Q1 2022 17 Itabira Vale Southeastern System Brazil Restart Q1 2022 15 Iron Bridge FMG Pilbara Australia New H2 2022 22 Gelado Project Vale Northern System Brazil Restart H2 2022 10 S11D Vale Northern System Brazil Ramp up H2 2022 10 Serra Leste Vale Northern System Brazil Restart H1 2023 4 Recent Exploration Projects Source: S&P Global Platts
- 13. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Projects/ Expansion Company Location Country Project Type Start up Capacity (million mt/y) Timbopeba Vale Southeastern System Brazil Expansion H2 2023 7 Yekepa expansion ArcelorMittal Yekepa Liberia Expansion 2023 10 S11D (120 project) Vale Northern System Brazil Expansion H1 2024 20 Casa de Pedra CSN Congonhas Brazil Expansion 2033 78 Simandou SMB-Winning- Government of Guinea Blocks 1&2 Guinea New 2027 100 Simandou Rio Tinto- Chinalco- Government of Guinea Blocks 3&4 Guinea New 2030 100 Recent Exploration Projects Source: S&P Global Platts
- 14. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Increase in Production Capacity Guinea 200 mil mt/y Liberia 10 mil mt/y Australia 170 mil mt/y** Brazil 100 mil mt/y SMB-Winning- Gov of Guinea 100 mil mt/y Rio Tinto- Chinalco-Gov of Guinea 100 mil mt/y BHP 80 mil mt/y FMG 52 mil mt/y Rio Tinto 70 mil mt/y** Vale 27 mil mt/y CSN 78 mil mt/y Arcelor Mittal 10 mil mt/y Source: S&P Global Platts
- 15. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Statistics on Iron Ore Reserves and Output 48 29 25 20 6.5 6 5.5 0 10 20 30 40 50 60 Australia Brazil Russia China Ukraine Canada India Reserve Size (in billion tonnes) Reserve Size (in billion tonnes) 300 286 248 204 61 0 50 100 150 200 250 300 350 Vale Rio Tinto BHP Fortescue Metals Group Anglo American Iron Ore Output (in million tonnes) Iron Ore Output (in million tonnes)
- 16. IMPORT - EXPORT
- 17. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Major Importers of Iron Ore 118.90 9.60 6.90 3.70 2.20 75.4 6.1 4.4 2.3 1.4 - 20.00 40.00 60.00 80.00 100.00 120.00 140.00 China Japan South Korea Germany Taiwan Import Value and Share of Iron Ore in the Major Importing Countries Import Value of Iron Ore (US$Billion) Import Share of Iron Ore (%) Sources: Trade Map
- 18. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook 1342.19 151.13 9.44 0.88 30.44 1742.2 142.2 118.4 84.3 67.7 0 500 1000 1500 2000 Asia Europe (including EU) CIS Oceania Middle East (in million metric tons) Top 5 Iron Ore Consuming Region (2019) Iron Ore Consumption by Region 2019 (in million metric tons) Iron Ore Import by Region 2019 (in million metric tons) 1342.19 9.44 0.88 30.04 400.01 108.96 83.42 37.66 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Asia CIS Oceania Middle East Import Share of the Top 5 Iron Ore Consuming Region (2019) Iron Ore Domestic Production Share by Region 2019 Iron Ore Import Share by Region 2019 Sources: Statista Import and Consumption CIS = Commonwealth of Independent States
- 19. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Major Exporters of Iron Ore Source: World Stop Exports Major Exporters Conclusion • All countries have main companies that form an oligopoly • Main destination for exports is China
- 20. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook 834.42 369.72 93.51 84.74 64.63 919 405 351 238 97.5 0 200 400 600 800 1000 Australia Brazil China India Russia (in million metric tons) Top 5 Iron Ore Producing Countries (2019) Iron Ore Production by Country 2019 (in million metric tons) Iron Ore Export by Country 2019 (in million metric tons) Sources: Statistica 834.42 369.72 93.51 84.74 64.63 84.58 35.28 257.48 153.26 32.87 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Australia Brazil China India Russia Export Share of the Top 5 Iron Ore Producing Region (2019) Iron Ore Domestic Consumption by Country 2019 (in million metric tons) Iron Ore Export by Country 2019 (in million metric tons) Top Producers
- 21. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Fundamental Reasons affecting Demand and Supply of Iron Ore Steel When the demand of steel decreases, It decreases the demand for iron ore Demand Supply Technology Government Policies When the supply of steel decreases, this decreases the demand for iron ore Weather Condition Logistics Related Goods Economic Performances Government Policies Economic Performances Geopolitics
- 22. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Chinese Climate Goals result in a 11% fall in Steel Output Decrease in Demand for Iron Ore Increase in Demand for Iron Ore Steel Scrap as Iron Ore Substitute Emerging Markets and booming economies hungry for steel Fiscal stimulus in China boosts demand Current Supply Factor Recent Unforeseen Circumstances Decrease in Supply for Iron Ore Increasing Chinese Crackdown on Mines for Environmental Reasons Current Demand Factor
- 23. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Substitutes 30% 20% 50% 0% 20% 40% 60% 80% 100% 120% China China’s Iron Ore Source Iron Ore Imports (Australia) Domestic Iron Ore Iron Ore Imports (Others) Sources: S&P Global & BIR 90.1 147.9 187.8 215.9 220.3 88.4 93.3 90.939 86.473 77.539 56.7 58.8 60.1 60.7 50 0 50 100 150 200 250 2016 2017 2018 2019 2020 Steel Scrap use for Steelmaking in Key Countries and Regions (Million Tonnes) China EU-28 USA
- 24. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Dec 2019: Covid-19 Outbreak in China Canberra proposing an international investigation into the roots of Covid-19 Australia deepens its connection to the Quad grouping with the U.S China’s National Development and Reform Commission seek diversification of the country’s Imports Unlocking Simandou’s Reserve April 2020 Feb 2021 Dec 2019 May 2021 2027 Geopolitics – History, Present, Future
- 25. VALUE CHAIN
- 26. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Industry Value Chain Midstream Smelting and Processing Pig Iron Crude Steel Scrap Steel Electric Arc Furnace Steel Rebar Steel Wires Hot Rolled Steel Sheet Cold Rolled Steel Sheet Steel Plate I-Beam Others Casting Rolling Source: World Steel Association Upstream Iron Ore Mining Iron Ores Lumps Complementary Goods Fines Pellets Pelletization Coking Coal/ Metallurgical Coal Raw Coal Coal Dust Pulverized Coke Coking Process Others Water Electricity Solvent Limestone Downstream Steel Application Buildings & Infrastructure Mechanical Equipment Automotive Metal Products Other Transport Domestic Appliances Electrical Equipment 52% 16% 12% 10% 5% 2% 3% Blast Furnace
- 27. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Industry Value Chain Upstream Iron Ore Mining Iron Ores Lumps Complementary Goods Fines Pellets Pelletization Coking Coal/ Metallurgical Coal Raw Coal Coal Dust Pulverized Coke Coking Process Others Water Electricity Solvent Limestone Core Drilling Open Pit Mine Haul Truck Concentrator Loading
- 28. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Industry Value Chain Midstream Smelting and Processing Pig Iron Crude Steel Scrap Steel Electric Arc Furnace Steel Rebar Steel Wires Hot Rolled Steel Sheet Cold Rolled Steel Sheet Steel Plate I-Beam Others Casting Rolling Unloading Stacker/reclaimer Coking Plant Sinter Plant
- 29. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Industry Value Chain Midstream Smelting and Processing Pig Iron Crude Steel Scrap Steel Electric Arc Furnace Steel Rebar Steel Wires Hot Rolled Steel Sheet Cold Rolled Steel Sheet Steel Plate I-Beam Others Casting Rolling Blast Furnace DRI Furnace Electric Arc Furnace Scrap Steel
- 30. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Industry Value Chain Midstream Smelting and Processing Pig Iron Crude Steel Scrap Steel Electric Arc Furnace Steel Rebar Steel Wires Hot Rolled Steel Sheet Cold Rolled Steel Sheet Steel Plate I-Beam Others Casting Rolling Hot rolling Cold rolling Hot Strip Mill Coil Plate Section Rod Tube Wire
- 31. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Industry Value Chain Downstream Steel Application Buildings & Infrastructure Mechanical Equipment Automotive Metal Products Other Transport Domestic Appliances Electrical Equipment 52% 16% 12% 10% 5% 2% 3% Buildings Highways Bridge Wind Turbine Train Excavator Fence Cars Can Washing Machine
- 32. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Key Stake Holders Across Iron Ore’s Value Chain Exploration Mining Inventory Rail / Road Downstream Major Stakeholders Geologists - Identifying the appropriate mines, through testing of chemistry and rocks - Able to determine the size of the deposit - Miners - Responsible for the actual mining process Processing Plants - This process is typically referred to as beneficiation or palletisation - Goal is to extract the metal from the ore - Traders & Buyers - Primary movers of the product; facilitate cross border transactions - Ensure there is always a market for the goods Processing Plant Port Ship Export and Domestic Market
- 33. TRANSPORTATION
- 34. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook When ready for transportation, a reclaimer picks up the iron ore from stockpiles and conveys it to train load out facilities Export Domestic Market Downstream The trains transport the iron ore to ports Once the iron is processed it is stockpiled in the stockyards Source: BHP The iron is then transported onto ships at port facilities and exported to customers all over the world How is Iron Ore Transported
- 35. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Types of Ships used for Transportation Cape Size Bulk Carriers VLOC Very Large Ore Carriers ValeMax Supramax Panamax Most Common Smaller Shipments • ValeMax Dead weight tonnage is over 400,000. • The world's largest iron ore carrier • But is usually over 200,000 – 400,000 • Freights cost by up to 25% • From $21/$22 a tonne to $17/$18
- 36. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook The Baltic Dry Index • The Baltic Dry Index is reported daily by the Baltic Exchange in London. • Provides a benchmark for the price of moving the bulk by sea. • The index is a composite of three sub-indices that measure different sizes of dry bulk carriers: • Capesize • Panamax • Supramax • The Baltic Dry Index: • 23 different shipping routes carrying coal, iron ore, grains and many other commodities. • Interesting point : The Baltic Exchange was acquired by SGX in 2016 Source: Trading Economics
- 37. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Freight Market – Dry Bulk Dry Bulk Shipping Rates Source: Bloomberg • Commodity Demand has recovered • Government policies have fuelled economic growth • Inefficiencies and port congestion due to Covid quarantines have contributed to increased shipping cost Explanation
- 39. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Miners Traders Steel Mills Sales Marketing of Iron Ore
- 40. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Major Indices IODEX Bench- mark Price MIODEX Pricing: • Base CFR Price (US$/DMT) = ((Price Basis x (Typical Fe/62)) – Applicable Discounts) + Freight • Price Adjustments for impurities (Silica, Alumina, Phosphorus, Moisture) • Could be more complex o Lump premiums, agent fees, etc. Sales Marketing of Iron Ore • Before 2008, the price of iron ore was hammered out between buyers and sellers through fixed one-year contract. • However, with the rise of China and the rapid growth in the country’s steel demand, such system started to break down. • Spot prices were lower than year-contracts. • Platts started assessing the spot price of seaborne iron ore daily in Jun 2008. How is Iron Ore sold? Source: Financial Times
- 41. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Midstream – Downstream Exchanges - Dalian Commodity - Steel Exchange India - SGX - Shanghai Futures Exchange London Metal Exchange (LME) - New York Mercantile Exchange (NYMEX) How is steel sold? Physical Steel Trading - Car manufacturers - Construction industry - Defense/Aerospace/Industrial Equipment/Mechanical manufacturers - Energy and power sector Sales Marketing of Iron Ore
- 42. TRADE FLOWS
- 43. Iron Ore Trade Flows These four countries alone are responsible for 88.2% of total global iron ore imports in 2020. Germany China Japan US$70.8 billion US$118.9 billion US$25.7 billion US$4.9 billion US$4 billion South Korea
- 44. Iron Ore Trade Flows Germany South Korea China Japan US$9.6 billion US$5 billion US$2.9 billion
- 45. Iron Ore Trade Flows Germany China Japan US$6.9 billion US$5 billion US$0.97 billion South Korea
- 46. Iron Ore Trade Flows Germany South Korea China Japan US$1.1 billion US$0.84 billion US$3.7 billion US$0.6 billion
- 47. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Steel Producer Iron Ore Miners • Miners profit off selling iron ore at a high price; long position • Therefore, they take a short position in the futures market by selling future contracts • Producers of steel maximize their profits when they can obtain iron ore at a low cost; short position • Therefore, to hedge, they will take a long position in the futures market through the buying of future contracts Iron Ore Futures Contract Example Hedging
- 48. SUSTAINABILITY
- 49. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Mining Process Methods • Waste Dump • Tailings • Recycling steel Sustainable Iron Source
- 50. OUTLOOK
- 51. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Historical Prices - 2019 Iron Ore Historical Prices Source: Markets Insider Supply Side • Price surge in 2019 can be attributed to the disruption of Iron ore supply • A tailings dam collapsed at the Córrego do Feijão mining complex in the Brazilian state of Minas Gerais. The dam belonged to Vale, the world’s largest iron-ore mining company. • Cyclone Veronica further hindered the production in Australia affecting Rio Tinto
- 52. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Historical Prices – 2019 Iron Ore Historical Prices Source: Markets Insider Demand Side • Bullish demand from China further caused the iron prices to rally. • Crude-steel production had been hitting new all-time highs on the back of a booming property sector induced by Beijing’s recent stimulus package. • The first five months of 2019 saw China produce 10 percent more steel than it did during the same five-month period of the previous year, with new construction starts improving by 15.5 percent in April and 13.1 percent for the January-April period.
- 53. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Historical Prices - 2019 Iron Ore Historical Prices Source: Markets Insider Explanation • The price surge 5 months later resulted in a price decrease due to steel-making companies in China having their margins decreased • Second to construction, automobiles are a huge buyer of iron ore. • As car sales slumped globally and in China, demand continued to be bullish
- 54. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Iron Ore Historical Prices – 2020 - 2021 Iron Ore Historical Prices Source: Markets Insider Explanation • Reached an all-time high in May 2021 ($235.55/tonne) • Chinese steelmakers ramp up production in defiance of government attempts to rein in output to control the industry’s carbon emissions.
- 55. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Click to add text Iron Ore Historical Prices – 2021 Iron Ore Historical Prices Source: Markets Insider Explanation • The slump begins • The price of iron ore has been dipping since May and has largely been attributed to steel production cuts issued in China and has been effective
- 56. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Waterfall Chart of Iron Ore Prices
- 58. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook Recent News Lower imports by China following its move to control steel production to meet carbon emission norms Australia's national security partnership with US and UK could seriously jeopordize the relationship with their biggest trading partner – China Major property developers being affected by a debt crisis which may result in defaults and a crash of the housing market. Covid 19 impact on prices Seasonal weather disruptions affecting supply
- 60. Introduction Mining Import & Export Value Chain Transportation Sales and Mkt Trade Flows Sustainability Outlook 1. Global Usage of Steel (Low) → Usage is expected to plateau for developed countries and increase for developing countries 2. Increased usage of recycled scrap metal to offset reliance on Iron Ore imports (low to high) 3. Global Emission rules and Carbon Neutrality goal (low to high) → Expected to be more stringent as climate change becomes more urgent 952.72 1023.95 1074.74 1064.12 1068.65 1170 83.30 90.10 147.90 187.8 215.93 220.3 0 200 400 600 800 1000 1200 2015 2016 2017 2018 2019 2020 China iron ore imports vs steel scrap use for steelmaking (million metric tons) Source: Statista 4. Technology → Cost of using Electric Arc Furnace (more environmentally friendly) can be brought down in the future (low) OVERALL STAND: Given the mentioned factors and excluding any shock events (Covid-19), the price of iron ore is expected to decrease in the long-term future. (Bearish) Factors that affect long term estimates
- 61. Q & A
- 62. THANK YOU!!!