UNCTAD: Global iron ore output hits record high in 2011

In 2011, global iron ore output totaled 1.92 billion mt, hitting an all-time peak level, according to a report issued by the United Nations Conference on Trade and Development (UNCTAD). The report indicates that world iron ore production continued to grow after the gradual post-crisis recovery of the global steel industry.
 
Iron ore production in 2011 increased in most regions and countries except Europe (including CIS countries), where production stagnated. Among the major producers, Australia increased its iron ore production by 12.7 percent, Brazil by 5.1 percent, and China by 2.1 percent in 2011, while production in India declined to an estimated 196 million mt, down 7.5 percent, all on year-on-year basis.
 
Iron ore prices continued on an upward trend through most of 2011, the report says, as Chinese demand recovered and domestic Chinese iron ore producers were unable to keep up with this demand. Towards the end of 2011, however, prices declined in response to a slowdown in Chinese growth and the worsening economic outlook for European countries. During the first half of 2012, prices remained more or less constant at a level which, although high from a historical point of view, just allowed high-cost producers, such as those in China, to break even.
 
With almost all iron ore producers and steel mills having abandoned the benchmark pricing system where prices were set once a year, there is widespread confusion about prices, the annual study notes. It predicts, however, that price volatility will increase compared with the previous system, as new practices for price setting vary widely, and there are a large number of published prices and indices, each with a different product specification. The report also says that prices, while declining slowly from 2013 onwards, will remain at levels that must be considered high from a historical perspective, with a floor at around $120/mt delivered in China.
 
Steel production elsewhere in the world was also growing, though it had still not reached its pre-crisis production levels by the end of 2011. In Japan, imports of iron ore fell by 4.4 percent year on year to 128.4 million mt. Imports by the Republic of Korea increased by 15.3 percent to 64.9 million mt. European imports (excluding the CIS countries) rose by 16.8 percent in 2011, reaching 156.4 million mt, or just over 13.7 percent of world imports, the report notes.
 
According to UNCTAD, as of May 2012 796 million mt of new production capacity was expected to come on stream between 2012 and 2014.
 
The three largest iron ore-producing companies, Brazil-based Vale and Australia-based Rio Tinto and BHP Billiton, together controlled 34.7 percent of world production in 2011, the reports says. The market share of the three companies decreased, albeit slightly, from 35 percent in 2010, and their share is still lower than the peak of 36.4 percent achieved in 2005.
 
On the basis of an unchanged relationship between iron ore demand and crude steel production, the report estimates that iron ore use will increase from 1.92 billion mt in 2011 to about 2 billion mt in 2012 and 2.08 billion mt in 2013.