Give donation to Consortium

Sunday, June 28, 2009




Global iron ore production increased 3.6% in 2008,

despite declining demand


Geneva, 26 June 2009 -- Demand for iron ore will surely be lower in 2009 than in 2008, the UNCTAD publication The Iron Ore Market 2008-2010 says, and a current oversupply situation, in which falling steel production is occurring as iron ore production capacity increases, will not go away soon.

The report is published by the UNCTAD Iron Ore Trust Fund in cooperation with the Raw Materials Group of Sweden.


The steel industry is facing its worst demand downturn since the oil crisis of 1974-1975, the report says, and the iron ore market is of course affected. Price negotiations for iron ore have again been drawn out and buyers in China, the world's largest customer, have not yet agreed to any new prices.  In the agreements made so far between other Asian steel companies and the major iron ore companies, prices for the "fines" grade of iron ore have been reduced by 33 % for Australian ore and 28.2 % for Brazilian ore, while prices for lump ore have been reduced by 44 %. 

World use of finished steel products decreased in 2008 by 1.4 % to 1,197 million tons (Mt) while crude steel production decreased by 1.5 %, to 1,325 Mt. In 2009, world steel demand is expected to fall by as much as 15 %, although there are signs of resumed demand growth in China. 

In spite of falling demand in the final quarter, world production of iron ore grew by      3.6 % in 2008 to reach more than 1.7 billion tons, the report notes.  Output decreased in most countries, but the fall was more than offset by increases in the major producing countries, including Brazil, Australia, South Africa, and India. China produced 366 Mt, making it the world's largest producer, ahead of Australia.

International iron ore trade also reached a record level in 2008, as exports increased for the seventh year in a row and reached 882 Mt, up 7.8 %. Total iron ore exports have doubled since 1999. Australia's exports increased by 16 %, to more than 300Mt, and it is again the world's largest exporter, followed by Brazil, whose exports rose by 4.5 %.  Indian exports grew for the ninth consecutive year and the country is now, at 101 Mt, the third largest exporter. China is still by far the world's largest iron ore importer.  In 2008, its imports were 444 Mt, an increase of 16 % over 2007.


Freight rates peaked at a record level in May 2008, following which they declined sharply as the global financial crisis set in. By late 2008, freight rates had fallen to a low not experienced since the early years of the Millennium. The international freight market will remain depressed this year, the report predicts -- and perhaps for several years to come.


New iron ore mining capacity taken into operation in 2008 was reported to be about    88 Mt, a lower figure than in 2007.  The total project pipeline contains more than 430 Mt of new production capacity predicted to come on stream between 2009 and 2011. A majority of the projects most likely to be realized are in Australia.


The world iron ore industry currently is operating far below capacity, according to the report, and two important factors affect the outlook:  low freight rates and high costs in Chinese iron ore mines.  Small- and medium-sized Chinese producers with high costs will most likely be forced to reduce their output substantially, particularly as they are no longer protected by high freight costs for imported iron ore.

No comments:

Post a Comment