@treefeller - I accept the point of view from your side of the coin - and that there is uncertainty with respect to China and its housing market. One possibility to offset the decline in China's property market will be the global need to build green power sources and other green infrastructure. I was talking to someone recently who was involved in the construction of a new wind farm - and the steel required for one small wind farm in Victoria seemed very significant and becomes even more significant when you apply that on a world scale. Will the green energy infrastructure and the increase steel use of other developing nations offset the decline in Chinese steel use - who knows.
The article you posted stated "This time, the drop in demand is structural and permanent, so the price will have to remain much lower for much longer to shutter many iron ore mines". [emphasis added] However, what is also structural and permanent is decarbonisation and of relevance to us, decarbonisation of the steel industry.
@ktex7 posted above about a green steel product called JGreeX launched by JFE Steel. I did some research on this. It seems like that they are saying that if they can achieve a 25% reduction in carbon emissions across the whole of their steel production, they will call an equivalent percentage of production as green steel. To me, that seems to be a little game of smoke and mirrors, because that 25% of their production that they will call green steel, will have resulted in carbon production when those specific tonnes of steel were produced. Why would they go to those lengths - because the need for green steel is coming and coming fairly quickly.
My understanding from my research is that in December 2023, at COP28 seven key governments (including the US, UK, Germany and Canada) signed a pledge to adopt timebound commitments to procure low-emission steel to achieve net zero emissions in public buildings and/or public built infrastructure. It appears that they see this as an important milestone to help drive global decarbonisation by creating a market for low and near zero emission steel, especially given that public procurement is estimated to be responsible for 25% of global construction revenue (which would probably be bigger than the Chinese housing market, but I note that last comment is a guess and not researched).
The pledge that the governments can sign up to, has four levels of which levels 3 and 4 require the purchase of low emission or near zero emission material for production by 2030. It also notes that "A pledge to require procurement of near zero materials is subject to the availability of technology supply and acknowledges that near zero materials may come at a premium cost".
This implies that there is an expected premium and possible supply shortages of green steel to be expected. I see the lowest risk path to producing green steel is using high grade magnetite in an electric arc furnace. Therefore, high grade magnetite is likely to become in very short supply.
In my mind, this means two things are likely (well, at least these two things):
The likely scarcity of high grade magnetite will mean that its pricing will not be linked to the price of 62% hematite ores - and therefore will not be subject to the same supply and demand for hematite ores. I'm not saying the price of high grade magnetite will not be volatile - and some extreme highs could be possible, but the niche demand will separate it from any potential slump in the price of hematite ores.
If a merchant wants to be able to market high grade magnetite or a steel mill wants to produce green steel in commercial quantities by 2030, they need to act now. The lowest risk option to produce commercial quantities is to use known products and processes (high grade magnetite in electric arc furnaces). The only way to secure their ability to achieve that supply of green steel and does so consistently, is to secure the supply of high grade magnetite. Therefore, this will give various parties a need now to ensure supply and a reason to invest in projects like Hawsons at this stage of the project (think of Tesla investing in mines to secure supply of battery materials as an example of the way manufacturers act to secure supply).
Another thing to consider about the demand for high grade magnetite, is that Hawsons Supergrade is expected to be at 69% to 70% Fe. There is no other product currently in this space.
By way of comparison, Champion Iron currently produces an average of 66.2% Fe (per February 2024 investor presentation). They are looking to invest more to beneficiate that product to 69%. One would assume that is because even though 66.2% would already be considered high grade, the premium for 69% would make the costs of processing 66% ore to get to 69% worthwhile. To show just how rare 69% ore is on a global scale, consider the chart below from Champion Ore's February presentation.
For those wanting to do some of their own research, google the following to find the sources of my comments above:
Industrial Deep Decarbonisation Initiative - which is an initiative of the Clean Energy Ministerial
Green Public Procurement Pledge
UNIDO news seven key government generate demand for cement and steel decarbonisation via green public procurement campaign
HIO Price at posting:
3.6¢ Sentiment: Buy Disclosure: Held
