A further factor is that there are still some two billion people living in countries in Asia that are well behind China on the industrialization scale, and these are likely to want to boost steel demand in the coming decades. The lack of investment in additional iron ore capacity was one of the themes at the Global Iron Ore and Steel Forecast Conference in Perth this week.The iron ore industry needs to add 100 million tonnes of new capacity every year just to replace mines that are depleting, Paul McTaggart, lead metal and mining analyst at Citi, told the conference.
One way of reducing the amount of coal needed per tonne of crude steel is to use higher grade iron ore, and this is likely to drive a two-speed iron ore market, where high-grade material commands a widening premium over lower-quality ore.
If there is a looming supply shortfall, it’s likely that lower-grade iron ore will still be needed, but it may have to be priced at a substantial discount in order to justify the higher energy cost of turning it into steel, and possibly the price of carbon emissions, assuming China and others extend carbon pricing to industrial processes.
MGT Price at posting:
3.3¢ Sentiment: Buy Disclosure: Held
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