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Iron ore market should stabilise by 2010
Brendan Ryan
Posted: Mon, 04 Feb 2008
[miningmx.com] -- THE iron ore market should stabilise and move into surplus by 2010 and predictions of a 70% or more jump in iron ore prices this year seem optimistic.
That’s according to Magnus Ericsson, chairman of the Raw Materials Group, who also readily admitted in his presentation at the Mining Indaba that his nickname is “Mr Bearish.”
Ericsson said estimates by his mineral economics consultancy are that that 300 million tonnes (Mt) of new iron ore production capacity is “certain” to come on stream during the period 2008 to 2010.
In addition, he estimated there was another 50Mt of new production that would “probably “ come on stream giving a total new production estimate of 350Mt.
Against this, Ericsson estimated that total demand for iron ore should rise by just 200Mt.
“I concede that in the past the speed in the growth of new capacity has been slower than projected and demand growth has risen faster than predicted. But I still think that we will have a balance in the market during 2010 and perhaps as soon as 2009.”
Turning to China, Ericssson said; “I have a huge problem in seeing how the Chinese can accept price rises of 70% or more - as is being currently predicted – in this year’s iron ore negotiations."
He
pointed out domestic Chinese iron ore production was rising fast and, even though Chinese iron ore was low quality, at around 30% contained iron ore it was similar to what United States steel producers had frequently used.
Ericsson commented; “We don’t see a quick resolution to the Chinese contract negotiations which could last until May/June and our projection is for an increase of around 30%.”
Turning to the broad supply and demand situation, Ericcson said his consultancy’s estimates were that total iron ore production rose 11% to 1,645Mt during 2007 while the volume of iron ore exported rose 9% to 825Mt.
China accounted for 383Mt of total iron ore imports last year with Europe second at 185Mt and Japan third at 139Mt.
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