Great point Mas.
It is indeed significant that POSCO is obviously now taking an interest in HIO beacuse even providing billions capital to other iron ore producers is not going to solve their multiplying problems.
For the steel world has changed in the mere blink of an eye forever my friends.
There is good reason that Asian, US and European mills are sniffing around HIO as reality sinks in.
For the likes of POSCO, whose world has just been turned upside down:
- Can they get coal and high grade ore from Ukraine or Russia? No.
- Has the price of their energy inputs, coal and gas gone through the roof… permanently? Yes.
- The race is now on to get away from Russian oil and gas big time unless despot Putin gets tapped on the shoulder in coming weeks, causing permanent flow on effects. Why? Russia’s mainly Arctic oil and gas field infrastructure (only accessible in winter permafrost) relies on now withdrawn highly specialised western technology. And once a field goes down it could take DECADES to reinstate as every single component needs checking and repair over thousands of KM before production can restart. The flow on effect is that the remaining coal oil and gas supplies will remain in short supply until demand peaks when green energy takes over but thats at least a decade away.
- Are there intensifying pressures to reduce their Co2 emissions giving coking coal has to be burnt twice to be suitable for steel making? Yes
The Japanese, Germans and Koreans all have these same problems that have sprouted up in the blink of an eye, yet have now set in for a decade or more. China is munted as the real estate bubble is bursting and infrastructure for ghost cities is now nonsensical with disillusioned investors now going on mortgage repayment strikes, meaning lower steel demand unless the CCP invent another steel pyramid scheme. On top of that, Chinese population growth has peaked and is about to contract sharply leaving a relatively small working population, many with negative property equity, supporting masses of elderly retirees leading to the same malaise that the Japanese have experienced for decades. The Japs economic demise was heralded by a property bubble then bust as well.
Therefore the hematite part of the iron ore market is in for tough times yet magnetite should thrive. For the paradox is that China is the largest low quality (think rebar etc) steel producer yet the largest importer of quality steel….. from North Asia and Europe etc.
Germany has spent trillions on green energy yet has little wind and has wound back nuclear, is trying to get away from Russian gas and is therefore mining its own dirty coal like crazy, achieving the exact opposite of what it intended and has none of its own iron ore, practically begging Australia for expensive green hydrogen, now waiving huge contracts around. Ditto Korea and Japan, at least they understood they were never going to be green energy power houses. Yet they still need to provide the world, including the China factory of the world with high quality steel.
Meanwhile the USA is pretty much immune, it has its own resources of metal materials plus fracked oil and gas and abundant green energy potential like Australia, therefore the USD$ will continue to appreciate.Trading $US denominated products such as steel will create huge profits when turned back into the likes of ever depreciating yen etc back home, making it even more lucrative to produce it at overseas subsidiaries.
Thus the game has changed, it no longer makes economic sense to import coal, gas and iron ore and turn it into steel unless you have a cheap source of hydrogen that isn’t bonded to carbon. For getting hydrogen, the energy part of coal and gas, means releasing vast amounts of gasified carbon that is bonded to, which is no longer acceptable as its obvious the world will increasingly burn, flood, freeze, choke or cook if we don’t desist utilisng this now crude energy source.
This means making steel directly from green hydrogen, which means you need a convergance of wind and solar, scrap steel and/or high grade magnetite all nearby. Because green hydrogen is tricky and expensive to transport, it makes sense to produce steel close to its source where the right combination of resources exist in one geographical location. South Australia is now uniquely positioned to exploit the Braemar and massive solar and wind potential cheaply.
PREDICTION
The likes of POSCO, Japanese and German high grade steelmakers etc. will/have come to the conclusion that the likes of South Australia are ideal for using the vast sun and wind resources along with high grade magnetite to produce steel here or risk extinction. Using their steel making expertise plus green hydrogen like the SA govt is building in Port Bonython, and high grade magnetite then exporting it, as either finished or enhanced product. For doing so at their domestic mills no longer makes economic sense, nor will it for decades to come.
HIO is sitting pretty at the right place at the right time with the right product…. if I'm right, and I’m pretty sure I am, expect to see some truly amazing proposals emerge well before the end of this year.
