Report highlights

Asia is a leading producing region, closely followed by South America and Oceania. China, India, Brazil and Australia represent the largest producing countries in these regions. Three large companies dominate production: CVRD, Rio Tinto and BHP Billiton, which between them control 34.7% of world output. More importantly they control 78.2% of seaborne trade and therefore exerted a large measure of control over world markets in 2006/7. Consumers now have a choice of fewer suppliers than in previous decades and their bargaining power has thus been diminished. Global iron ore production has increased strongly since 2001 to meet rising demand from Asian steel industries, particularly in China and India. To date, this new capacity has resulted in a small surplus in the supply demand balance but there is now very little room for manoeuvre in the market.

A new generation of iron ore projects is now coming on-stream in Australia, South America, Western Africa, South Africa, Eastern Europe, the Middle East, China, India and other parts of Asia. Some of these projects are wholly or partially integrated with steel makers and others are independent of the major mining companies. Chinese steelmakers are investing heavily in iron ore projects overseas. This increasing trend will allow China to have a stronger control over raw material prices and seaborne trade. China is also, along with India, developing a number of new domestic projects to decrease dependence on high-cost imports.

Australia and Brazil will continue to be the main areas of growth, with exploration and development proceeding in those countries on a scale unmatched elsewhere in the world. New areas of exploration include West Africa and South America, which are likely to see deposits brought on stream in the near future.

Contract prices for iron ore are likely to increase by 50% in 2008. The large number of mining projects planned for the next few years could result in some price deflation by 2010.