Apparent trend of Iron Ore oversupply
“It will tend to be more beneficial to the buyer of iron ore in the world market. The trend of obvious oversupply is more pronounced.” On the Forum of Iron Ore on October 21, the guests shared a similar viewpoint.
“Iron ore suppliers should note that world iron production is mainly in Asia, accounting for 77% of the world, and global demand for iron ore is mainly to Asia, too. In 2013, China`s pig iron output is into the flat peaks, and this year showed slight decline in volatility.” Mr. Li Chuangxin, the Director of Metallurgical Industry Planning Institute said, "the change is mainly due to economic slowdown, the change of drivers of economic growth, and decline of steel industry profits.” Li Chuanxin believed that large iron ore companies would do everything possible to expand the scale, reduce production costs and maintain their market share. Taking BHP Billiton, Rio Tinto, Vale, FMG four companies as example, those who had a cost advantage, would owns the market. Those higher-cost iron ore companies would be squeezed out of the market.
Li Chuangxin believed that in the short term, the oversupply situation was unlikely to improve and prices were difficult to pick up. At the same time, under the support of the marginal cost, prices would not fell sharply again. In the next 2-3 year, iron ore prices would fluctuate around $ 50/ton. From the medium and long term, with the four major mine expansion complete, some high-cost mines would gradually withdraw from the market. Together with the countries of South Asia, Southeast Asia and other countries economic development-led rose in demand for steel, iron ore market would return to equilibrium of supply and demand, prices might creep up. There were opportunities and also challenges in the future market. Opportunities came from restructuring, mergers and acquisitions of mining companies, as well as the strategic cooperation of iron and steel enterprise and mining enterprise. Challenges mainly came from the survival of high-cost mines, especially the high cost of new mines.
Ms. Shao Yuhan, Wood Mackenzie`s iron ore and steel Consultant believed that the sum demand for iron in other countries in the world was not sufficient to balance the drop in Chinese demand for iron ore. Over the medium term, although supply would be more concentrated in large mines, but prices would remain under pressure. At present, the supply of iron ore was adequate, the supply gap would not appear until around 2030.Judging from the prices, the short middle term was more pessimistic, and it need higher prices to encourage new projects open in a long term. India would become the main drive demand.
Dr. Poole Butterworth, a global steel industry analyst of United Kingdom CRU International Limited, believed that over the next five years, more mines would be withdrawn from the market. That would make iron ore markets find balance again. By 2019, the price of iron ore would have a certain increase. (Cheng Xiujuan)
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