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Luke H PhD Conference 2012
- 1. Africa’s iron ore potential & implications for the global market Luke Hurst (Economics, Crawford School) High Impact Public Policy Research in the Asian Century Crawford School of Public Policy 27 November 2012
- 2. 0 20 40 60 80 100 120 140 160 180 200 Oct-82 Jul-83 Apr-84 Jan-85 Oct-85 Jul-86 Apr-87 Jan-88 Oct-88 Jul-89 Apr-90 Jan-91 Oct-91 Jul-92 Apr-93 Jan-94 Oct-94 Jul-95 Apr-96 Jan-97 Oct-97 Jul-98 Apr-99 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Impact of China’s rise on the iron ore market Oct-12
- 3. 0 20 40 60 80 100 120 140 160 180 200 Oct-82 Jul-83 Apr-84 Jan-85 Oct-85 Jul-86 Apr-87 Jan-88 Oct-88 Jul-89 Apr-90 Jan-91 Oct-91 Jul-92 Apr-93 Jan-94 Oct-94 Jul-95 Apr-96 Jan-97 Oct-97 Jul-98 Apr-99 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Impact of China’s rise on the iron ore market Oct-12
- 4. Africa’s iron ore potential • 47mt/a (BREE, Guinea & Mauritania by 2017) • 475-575mt/a (RBC Capital Markets, 32 mines by 2017) • 300mt/a (Ocean Equities, 16 mines by 2017) • Obstacles for project development: o Lack of infrastructure o Lack of knowledge capital o Unpredictable governance o Western banks hesitant to lend
- 5. Method • 27 projects (greenfield and expansions) • 3 risk based scenarios • Risk index 1. Host operational risk 2. Host political risk 3. Project infrastructure requirements 4. Investor experience 5. Investor-government relations 6. Funding risks 7. Chinese ownership & funding
- 6. West & central African iron ore scenarios 500 450 400 350 300 mt/a 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 2017 2018 West African exports (BREE 2012)
- 7. West & central African iron ore scenarios 500 450 400 350 300 mt/a 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 2017 2018 Low risk capacity West African exports (BREE 2012)
- 8. West & central African iron ore scenarios 500 450 400 350 300 mt/a 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 2017 2018 Medium risk capacity Low risk capacity West African exports (BREE 2012)
- 9. West & central African iron ore scenarios 500 450 400 350 300 mt/a 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 2017 2018 High risk capacity Medium risk capacity Low risk capacity West African exports (BREE 2012)
- 10. Forecast global export demand 2000 1800 1600 1400 1200 mt/a 1000 800 600 400 200 0 2011 2012 2013 2014 2015 2016 2017 2018* 2011 2012 2013 2014 2015 2016 2017 2018* High risk Medium risk Low risk Global export demand (BREE 2012) 1075 1149 1213 1279 1355 1439 1500 1561
- 11. Potential for export over-capacity 2000 1800 1600 1400 1200 mt/a 1000 800 600 400 200 0 2011 2012 2013 2014 2015 2016 2017 2018* 2011 2012 2013 2014 2015 2016 2017 2018* High risk 0.0% 8.0% 12.1% 17.3% 17.4% 17.8% 23.7% 25.9% Medium risk 0.0% 5.0% 7.3% 10.5% 9.9% 9.3% 12.0% 11.5% Low risk 0.0% 2.5% 3.6% 5.2% 4.9% 4.7% 6.0% 5.8% Global export demand (BREE 2012) 1075 1149 1213 1279 1355 1439 1500 1561
- 12. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 Fortescue 850 900 950 1000 1050 1100 1150 1200 mt 1250 1300 1350 1400 1450 1500 1550 1411 mt (RMG) 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 13. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 (2011-18) 1050 1100 Global production capacity expansion 1150 1200 mt 1250 Fortescue 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 14. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 (2018) 1150 1200 mt Fortescue Low risk scenario 1250 Ave. CIF A$50-80/t 1300 1350 1400 1450 1500 1550 1600 1561 mt 1650 1700 1750 1800 Import demand (2018) 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 15. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 mt 1250 Fortescue 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 16. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 1150 Medium risk 1200 mt scenario (2018) 1250 Fortescue Ave. CIF A$50-80/t 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 17. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 mt 1250 Fortescue 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 18. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 (2018) 1150 1200 mt 1250 Fortescue High risk scenario Ave. CIF A$50-80/t 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 19. CIF to China (A$/t) 0 20 40 60 80 100 120 140 160 50 100 150 Rio Tinto 200 250 300 BHP Billiton 350 400 450 500 550 600 Vale 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 mt 1250 Fortescue 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2150 2200 2250 2300 2350 2400
- 20. Some public policy implications AUSTRALIA • Tax revenues • Employment impacts AFRICA • Governance and institutions CHINA • Engagement with developing countries