According to a new United Nations Conference on Trade and Development (UNCTAD) Iron Ore Market Report, the industry recorded a surge in production and exports in 2016 following low prices and squeezed profit margins the previous year.
Key indicators of demand and supply, seaborne trade and price also showed improvement with prices exceeding $80 per dry metric ton (dmt) in December 2016.
The Iron Ore Report is one of two unique products by UNCTAD’s Trust Fund Project on Iron Ore Information which provides up-to-date statistics and analysis on developments in the world market for iron ore.
It is produced with S&P Global Market Intelligence as its information provider.
Yanchun Zhang, Chief of UNCTAD’s Commodity Policy Implementation and Outreach Section said, “The market for base metals such as iron ore is a yardstick for the global economy, and in recent years it has fluctuated closely with the state of emerging and developing countries’ economies.”
The analysis will be beneficial for professionals interested in the iron ore market and for developing economies requiring to import the metal for domestic industrial production.
Chinese consumption remained low but global iron ore production grew five per cent year-on-year in 2016, reaching a total of 2, 106 million tons (mt). This was driven by an additional 30 mt of direct shipping ore from Australia, which was the major source of new fine-products entering the Chinese market.
Iron ore exports exceeded 1,513 Mt in 2016, compared with under 1,439 Mt in 2015, and the seaborne market was more or less balanced, the Report shows.
Australia led the net increase in global trade contributing 44 Mt of incremental seaborne supply. The predominant products that entered the market were Pilbara blend fines and Carajas fines.
The Report adds that producers of iron ore have reduced mining costs substantially over the past four years and that the mining industry as a whole now spends $22/dmt less than it did in 2013 as a result of tightened capital controls, renegotiated contracts and the exit of high cost supply.
For the fourth consecutive year, iron ore exploration budgets declining $460 million from 2015 to $685 million last year.
Most of the fall can be attributed to Australia and China, which together accounted for almost half of the global decline.
The annual exploration budget for iron ore is now down 83 per cent from a high of $3.98 billion in 2012.