Perspectives on the long-term outlook for iron ore John Barkas john.barkas@metalytics.com.au Iron Ore 2015 Perth WA, 13 July 2015
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Platts IODEX 62% Fe index prices iron ore fines, CFR North China $200 US$/dry tonne CFR North China $175 $150 $125 $100 $75 $50 $25 $0 Source: Platts
World crude steel production, 1910-2015 1600 Million Tonnes 1400 1200 1000 800 600 400 200 Great Depression 58% 1945 1980: CAGR 5.4% 1980 2000: CAGR 0.8% GFC Recession 8% World ex China 2000 2010: CAGR 17.4% China 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: IISA/WSA, Metalytics analysis
World crude steel, million tonnes World GDP and steel production 1,800 World GDP (LHS) 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1,500 1,200 900 600 300 World GDP at constant (2010) prices, US dollar trillions Sources: World Bank, IISA/WSA, Metalytics analysis
The iron ore price boom in perspective $180 $160 $140 Nominal Real 2015 terms US$/dry metric tonne $120 $100 $80 $60 $40 $20 $0 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 Annual prices for Australian reference fines (62%Fe), FOB Pilbara Source: Metalytics analysis
Seaborne iron ore a growing market Million wet tonnes 1,800 1,600 1,400 1,200 1,000 800 600 400 200 other sources Canada Sth Africa India Australia Brazil 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Australia s market share has grown strongly currently at 57% Source: Metalytics analysis
World steel production 2,000 1,800 Million tonnes 1,600 1,400 1,200 1,000 800 600 Rest of world Other Asia 400 200 China 0 1992 1996 2000 2004 2008 2012 2016 2020 Metalytics forecasts China s steel production will approach 900Mtpa by the end of the decade Source: Metalytics analysis
Forecast for China: diverging trends 1,400 million tonnes 1,200 1,000 800 600 China Steel production China Iron ore imports 400 200 0 1992 1996 2000 2004 2008 2012 2016 2020 China s domestic iron ore production peaked in 2013 (finished grade basis) Source: Metalytics analysis
China s iron ore imports Australia s market share 250 200 million tonnes 150 100 other sources 50 Australia 0 Mar 2007 Dec 2007 Sep 2008 Jun 2009 Mar 2010 Dec 2010 Sep 2011 Jun 2012 Mar 2013 Dec 2013 Sep 2014 Jun 2015 Australia now supplies more than 60% of Chinese iron ore imports Source: China Customs data, Metalytics analysis
Cash cost curve outlines for world iron ore mines (ex-china) US$/dry tonne in real (2015) terms $140 $120 $100 $80 $60 $40 $20 $0 2012 2013 2014 2010 2015 2007 2005 2016 0 200 400 600 800 1,000 1,200 1,400 1,600 Cumulative millions of tonnes (wet) Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Cash cost curve outlines : 2005 and 2015 US$/dry tonne in real (2015) terms $140 $120 $100 $80 $60 $40 $20 $0 2015 2005 0 200 400 600 800 1,000 1,200 1,400 1,600 Cumulative millions of tonnes (wet) Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Between 2005 and 2012, the cost curve has extended and moved up US$/dry tonne in real (2015) terms $140 $120 $100 $80 $60 $40 $20 $0 2012 2015 2010 2007 2005 0 200 400 600 800 1,000 1,200 1,400 1,600 Cumulative millions of tonnes (wet) Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Post-2012, the cost curve has extended and flattened US$/dry tonne in real (2015) terms $140 $120 $100 $80 $60 $40 $20 $0 2012 2013 2014 2015 2016 0 200 400 600 800 1,000 1,200 1,400 1,600 Cumulative millions of tonnes (wet) Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Cost curve centiles Australian iron ore mines US$ per DMT (real 2015 terms) $80 $70 $60 $50 $40 $30 $20 $10 $0 90% 75% 50% 25% 2005 2007 2009 2011 2013 2015 Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Cost curve centiles world data set US$ per DMT (real 2015 terms) $80 $70 $60 $50 $40 $30 $20 $10 $0 90% 75% 50% 25% 2005 2007 2009 2011 2013 2015 Source: Metalytics analysis: FOB cash costs of mines feeding world iron ore trade
Industry projections must take account of: Slower but inexorable world economic growth, but with escalating consumer demand for steel China s economic policy directed towards stable growth but without major stimulus Structural changes in production cost drivers, including lower oil prices and USD exchange rates Need to embrace growing environmental concerns in both the industrialised world and developing countries at all stages of the steel value chain
Metalytics current forecast $180 US$/dry metric tonne $160 $140 $120 $100 $80 $60 $40 Nominal Real 2015 terms Forecast $20 $0 1967 1973 1979 1985 1991 1997 2003 2009 2015 2021 Annual prices for Australian reference fines (62%Fe), FOB Pilbara Source: Metalytics analysis
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