JOHANNESBURG (miningweekly.com) – The outlook for global iron-ore demand was likely to improve over the medium- to long-term, Anglo American’s Kumba Iron Ore CEO Chris Griffith said on Thursday.

Global demand for iron-ore would remain dependent on steel manufacturing in China, which accounted for more than two-thirds of demand, but which had had a relatively subdued second half during 2011.

China’s crude steel production slowed towards year-end on lower steel prices and slower steel demand and was down 7% in the second half of the year compared with the first half.

However, Chinese seaborne iron-ore imports rose 11% in the second half compared to the first half, which resulted in a sharp fall in index prices in the final quarter of 2011, reducing the need for high-priced domestic ore in the second half of the year.

Overall, global steel production was up by 6% to 1.5-billion tons in 2011, while China’s seaborne iron-ore imports rose by 8% to 654-million tons in 2011.

Kumba maintained that steel production decreases had levelled out, noting that spot prices had climbed to about $140/t, following a fall to $116.75/t in October.

Therefore, the JSE-listed miner held a positive view on the market from the second half of 2012. But over the first six months of 2012, the iron-ore market was expected to maintain its current market conditions.

“Following this, the global market will improve and we should see some policy loosening of fiscal policy in China and increased production,” Griffith told Mining Weekly Online.

In the short-term, though, the iron-ore market could experience volatility, owing to China’s monetary tightening measures and Europe’s lack of coordinated policy response to tackle the sovereign debt crisis.

But supply-side challenges, including seasonal weather impacts, could result in a tight market balance.

“Ongoing challenges producers face in delivering new supply would lead to increasing capital intensity and underpin the long-term pricing outlook,” he said.

ANC PAPER & KUMBA

Meanwhile, Griffith was sanguine on suggestions contained in a draft African National Congress policy discussion document indicating government may seek to gain an interest in Kumba as part of efforts to reduce steel prices.

“I have not seen the leaked document, so it would be difficult to comment. But I have heard the same rumour,” Griffith said, adding that he believed there was an acknowledgement within the document that increasing its stake would be difficult for the government to accomplish, as a change in the Constitution would be required.

He stated that South Africa currently had an oversupply of steel and, considering the size of the country’s gross domestic product, the domestic steel industry was relatively one of the largest steel sectors globally.

“Even if there was more iron-ore [supply] available, it would not translate into additional steel production in South Africa, as we are not even using all the steel capacity we have right now,” he told Mining Weekly Online.

Griffith believed that government was unlikely to act unilaterally in taking up a position in Kumba, indicating that the atmosphere was rather one of engagement.

As at December 2011, Kumba had ore reserves estimated at 1.2-billion tons at its three mining operations, namely Sishen and Kolomela, in the Northern Cape, and Thabazimbi, in Limpopo. Kumba’s estimated mineral resources were in excess of its ore reserves at these operations, as well as the miner’s Zandrivierspoort magnetite and Phoenix projects, at 1.3-billion tons.
 

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