Ore depletion and China demand to sustain iron ore price, says Vale
Vale does not believe iron ore prices will be significantly affected by new output capacity over the next few years as ore depletion and growth in Chinese steel production will continue balancing the market.
Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.
Every year the global steel market needs “at least 100 million tonnes” of added iron ore output, José Carlos Martins, executive director for iron ore and strategy at Vale, said during a conference call for analysts on Thursday August 8.
Some 50-60 million tonnes of new iron ore production is necessary each year only to replace output that is lost globally by ore depletion, he said.
“Ore depletion depends on [iron ore] prices: when prices are high, depletion decreases, and when price goes down, depletion increases,” Martins said.
Depletion falls when iron ore price rises because idled mines, which produce material with lower Fe content, are put back into operation, thus increasing total iron ore production.
As soon as prices start to decrease, such costlier mines have to shut down again.
Martins estimates that 3-5% of the world’s iron ore production decreases as a consequence of ore depletion.
And growth in steel production, especially in China, requires 60-70 million tpy of added iron ore output.
“In the past few years there has been a level of $130 per tonne as a year average.”
“It’s possible that there will be some reduction due to the entrance of new projects,” Martins said, but added: “I don’t believe prices will fall in a sustainable way over the next few years below the levels of $100-110 per tonne.”