Independent research body The Steel Index (TSI) reports that iron-ore supply is set to increase, as new projects, particularly from Australia, reach fruition, bolstered by demand from China.

“The Australian government’s commodities forecasting unit, the Bureau of Resources and Energy Economics, upgraded the amount of iron-ore it expects the country to ship this year. The Canberra-based outfit now expects iron-ore exports to reach 571-million tons by the end of the year, up from the 554-million tons it predicted in March,” the TSI notes.

This increase would be 16% higher than the 494-million tonnes exported from Australia in 2012, owing largely to increased production from mining giants including Rio Tinto, BHP Billiton and Fortescue Metals Group.

The increased dependency on China for iron-ore demand – where it was reported that imports had risen to 65.6-million tons in May, of which, more than 50% of that intake came from Australia and only 17% from Brazil – would also present substantial opportunity for the intensified development of African iron-ore projects, particularly in South Africa.

South African iron-ore producers, which include producers Kumba and Assmang, depend on a viable market for a secure iron-ore and steel product takeoff.

These companies believe that should rail and port capacity be sufficient, and enough water and energy be available, South African iron-ore is expected to reach a combined total output of 100-million tons a year between 2015 and 2020.

The South African Kumba iron-ore mine, which is the fourth largest in the world, and the largest in Africa, has a portfolio set to grow by the year 2020. The Kolomela expansion project set to take place at Kumba, which currently produces around six-million tons of iron-ore a year, is still at the prefeasibility stage. The project is set to start in 2017 and produce similar product to what is currently being produced.

The Assmang-owned Khumani iron-ore mine, which is situated in the Northern Cape province of South Africa, has almost finalised its expansion project, which entails expanding the mine by developing the surrounding area to increase production from ten-million tons a year to 16-million tons a year. Phase 1A of the project has been completed, with the mine producing ten-million tons a year. Phase 2 of the project is under way and is expected to be complete before the end of 2013.

The Anglo American-owned Sishen lower-grade project Phase 1 comprises jig discard and is expected to start in 2019 and produce 1.7-million tons of fine ore a year. Phase 2 of the Sishen lower-grade project is currently at the exploration stage and is expected to produce about 4.3-million tons of fine ore a year by 2019. The Sep 1B project is pending the completion of a feasibility study and is expected to produce 1.1-million tons of high-grade iron-ore a year by 2018.

Meanwhile, with Transnet Freight Rail (TFR) expecting to invest R10.8-billion in rail projects, from 2013 to 2019, the iron-ore industry looks promising.

Transnet has confirmed it is proceeding with the development of a third heavy-haul rail corridor, which will serve the deep- water Port of Ngqura near Port Elizabeth, in the Eastern Cape. This development is being created in addition to the existing Sishen-Saldanha iron-ore rail line, and the Coallink corridor that serves Richards Bay. The first phase of the project, a combined rail and harbour expansion, is said to cost R27-billion.

The rail project is aimed at connecting the iron-ore mines in the Northern Cape with the Indian Ocean Port of Ngqura. The 1 003 km corridor will be created using existing rail lines. TFR is currently transporting about 5.5-million tons a year of export produce on the existing rail line, but plans to upgrade the line to accommodate a 26 t axle-load.

Transnet has announced that the route from Northern Cape to the Port of Ngqura has already been electrified and it plans to operate the corridor with a dual-system locomotive.

Global Iron-Ore Market

Not all mining operations are finding the current state of the iron-ore industry profit- able. Brazil continued to struggle with the growing demands for iron-ore, while Australia’s junior miners suffered setbacks in June, with Grange Resources closing its Perth-based office, owing to a lack of progress with its Southdown magnetite pro- ject. Chinese-Australian partnership CITIC Pacific postponed shipments for the Sino iron-ore project, to later this year. The Sino project is one of China’s largest investments in the Australian resources sector, and is the largest magnetite mining and processing operation under construction in Australia.

Further, the Mitsubishi Corporation has indefinitely postponed development of the Oakajee port and rail infrastructure project, in Western Australia, and has halted the expansion of its Jack Hills iron-ore mine.

A government official from Western Africa stated that the 2015 production start-up deadline of the Rio Tinto-owned Simandou iron-ore project in Guinea, was likely to be postponed, owing to a lack of capital needed to develop the greenfield project, having increased from $9-billion to between $16- billion and $20-billion.

Looking Forward

“In the current economic climate, steel manufacturers are seeking stability. Owing to higher temperatures and the prediction of heavy seasonal rain in China between July and August, productivity at construction sites is predicted to slow in these months,” TSI states.

Iron-ore production at mining giant Vale’s Minas Gerais and Carajas mines, in Brazil, is expected to continue declining. Vale is expecting an output of 306-million tons in 2013, compared with a 309-million-ton output in 2012.

Total iron-ore production for the next three years by the biggest iron-ore miners Rio Tinto, Vale and BHP Billiton is expected to exceed 700-million tons a year.

BHP Billiton believes that global iron-ore supplies will grow faster than demand over the long-term and, therefore, that prices will drop, and the volatility of raw material used for steel production, will be reduced.

The long-term outlook for the iron-ore industry is positive but cautious. Vale predicts that the demand for iron-ore will continue to increase, owing to China’s expansion and urbanisation. Rio Tinto agrees that population growth and urbanisation in China and India will continue to drive demand for steel and, therefore, iron-ore.

Meanwhile, India’s gross domestic product is expected to increase, owing to the development of infrastructure, surpassing China’s growth rate and reaching about $27-trillion by 2050.