Iron ore market

Date: 2015-10-07; view: 450.

Market of ores and metals. Primary goods: iron ore, ores of non-ferrous metals and non-ferrous metals. Market of ferrous metals. Market of non-ferrous metals. Prime manufacturers and exporters of iron ore, ores of ferrous and non-ferrous metals. Main consumers and importers of ores and metals

Theme 5. World markets of ores, non-ferrous and ferrous metals

1. Market of ores and metals. Primary goods: iron ore, ores of non-ferrous metals and non-ferrous metals. Market of ferrous metals. Market of non-ferrous metals. Prime manufacturers and exporters of iron ore, ores of ferrous and non-ferrous metals. Main consumers and importers of ores and metals.

2. Copper, copper ores and concentrates. Aluminum, bauxites and alumina. Lead, lead ores and concentrates. Zinc, zinc ores and concentrates.

3. Tin, tin ores and concentrates. Nickel and nickel ores. Gold markets. Markets of precious metals. Manufactured goods - the iron made from iron ores and steel.

Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, deep purple, to rusty red. The iron itself is usually found in the form of magnetite (Fe₃O₄), hematite (Fe₂O₃), goethite (FeO(OH)), limonite (FeO(OH).n(H₂O)) or siderite (FeCO₃).

Ores carrying very high quantities of hematite or magnetite (greater than ~60% iron) are known as "natural ore" or "direct shipping ore", meaning they can be fed directly into iron-making blast furnaces. Most reserves of such ore have now been depleted. Iron ore is the raw material used to make pig iron, which is one of the main raw materials to make steel. 98% of the mined iron ore is used to make steel. Indeed, it has been argued that iron ore is "more integral to the global economy than any other commodity, except perhaps oil".

Metallic iron is virtually unknown on the surface of the Earth except as iron-nickel alloys from meteorites and very rare forms of deep mantle xenoliths. Although iron is the fourth most abundant element in the Earth's crust, comprising about 5%, the vast majority is bound in silicate or more rarely carbonate minerals. The thermodynamic barriers to separating pure iron from these minerals are formidable and energy intensive, therefore all sources of iron used by human industry exploit comparatively rarer iron oxide minerals, primarily hematite.

Prior to the industrial revolution, most iron was obtained from widely available goethite or bog ore, for example during the American Revolution and the Napoleonic wars. Prehistoric societies used laterite as a source of iron ore. Historically, much of the iron ore utilized by industrialized societies has been mined from predominantly hematite deposits with grades in excess of 70% Fe. These deposits are commonly referred to as "direct shipping ores" or "natural ores". Increasing iron ore demand, coupled with the depletion of high-grade hematite ores in the United States, after World War II led to development of lower-grade iron ore sources, principally the utilization of magnetite and taconite.

Iron ore mining methods vary by the type of ore being mined. There are four main types of iron ore deposits worked currently, depending on the mineralogy and geology of the ore deposits. These are magnetite, titanomagnetite, massive hematite and pisolitic ironstone deposits.

Banded iron formations (BIFs) are sedimentary rocks containing more than 15% iron composed predominantly of thinly bedded iron minerals and silica(as quartz). Banded iron formations occur exclusively in Precambrian rocks, and are commonly weakly to intensely metamorphosed. Banded iron formations may contain iron in carbonates (siderite or ankerite) or silicates (minnesotaite, greenalite, or grunerite), but in those mined as iron ores,oxides (magnetite or hematite) are the principal iron mineral. Banded iron formations are known as taconite within North America.

The mining involves moving tremendous amounts of ore and waste. The waste comes in two forms, non-ore bedrock in the mine (overburden or interburden locally known as mullock), and unwanted minerals which are an intrinsic part of the ore rock itself (gangue). The mullock is mined and piled in waste dumps, and the gangue is separated during the beneficiation process and is removed as tailings. Taconite tailings are mostly the mineral quartz, which is chemically inert. This material is stored in large, regulated water settling ponds.

Iron is the world's most commonly used metal - steel, of which iron ore is the key ingredient, representing almost 95% of all metal used per year. It is used primarily in structural engineering applications and in maritime purposes, automobiles, and general industrial applications (machinery).

Iron-rich rocks are common worldwide, but ore-grade commercial mining operations are dominated by the countries listed in the table aside. The major constraint to economics for iron ore deposits is not necessarily the grade or size of the deposits, because it is not particularly hard to geologically prove enough tonnage of the rocks exist. The main constraint is the position of the iron ore relative to market, the cost of rail infrastructure to get it to market and the energy cost required to do so.

Mining iron ore is a high volume low margin business, as the value of iron is significantly lower than base metals. It is highly capital intensive, and requires significant investment in infrastructure such as rail in order to transport the ore from the mine to a freight ship. For these reasons, iron ore production is concentrated in the hands of a few major players.

World production averages two billion metric tons of raw ore annually. The world's largest producer of iron ore is the Brazilian mining corporation Vale, followed by Anglo-Australian companies BHP Billiton and Rio Tinto Group. A further Australian supplier, Fortescue Metals Group Ltd has helped bring Australia's production to second in the world.

The seaborne trade in iron ore, that is, iron ore to be shipped to other countries, was 849m tonnes in 2004. Australia and Brazil dominate the seaborne trade, with 72% of the market. BHP, Rio and Vale control 66% of this market between them.

In Australia iron ore is won from three main sources: pisolite "channel iron deposit" ore derived by mechanical erosion of primary banded-iron formations and accumulated in alluvial channels such as at Pannawonica, Western Australia; and the dominant metasomatically-altered banded iron formation related ores such as at Newman, the Chichester Range, the Hamersley Range and Koolyanobbing, Western Australia. Other types of ore are coming to the fore recently, such as oxidised ferruginous hardcaps, for instance laterite iron ore deposits near Lake Argyle in Western Australia.

The total recoverable reserves of iron ore in India are about 9,602 million tones of hematite and 3,408 million tones of magnetite. Chhattisgarh, Madhya Pradesh, Karnataka, Jharkhand, Odisha, Goa, Maharashtra, Andhra Pradesh, Kerala, Rajasthan and Tamil Nadu are the principal Indian producers of iron ore. World consumption of iron ore grows 10% per annum on average with the main consumers being China, Japan, Korea, the United States and the European Union.

China is currently the largest consumer of iron ore, which translates to be the world's largest steel producing country. It is also the largest importer, buying 52% of the seaborne trade in iron ore in 2004.^[5] China is followed by Japan and Korea, which consume a significant amount of raw iron ore and metallurgical coal. In 2006, China produced 588 million tons of iron ore, with an annual growth of 38%.

Over the last 40 years, iron ore prices have been decided in closed-door negotiations between the small handful of miners and steelmakers which dominate both spot and contract markets. Traditionally, the first deal reached between these two groups sets a benchmark to be followed by the rest of the industry.

This benchmark system has however in recent years begun to break down, with participants along both demand and supply chains calling for a shift to short term pricing. Given that most other commodities already have a mature market-based pricing system, it is natural for iron ore to follow suit. To answer increasing market demands for more transparent pricing, a number of financial exchanges and/or clearing houses around the world have offered iron ore swaps clearing. The CME group, SGX (Singapore Exchange), London Clearing House (LCH.Clearnet), NOS Group and ICEX (Indian Commodities Exchange) all offer cleared swaps based on The Steel Index's (TSI) iron ore transaction data. The CME also offers a Platts based swap, in addition to their TSI swap clearing. The ICE (Intercontinental Exchange) offers a Platts based swap clearing service also. The swaps market has grown quickly, with liquidity clustering around TSI's pricing.^[6] By April 2011, over US$5.5 billion dollars worth of iron ore swaps have been cleared basis TSI prices. By August 2012, in excess of one million tonnes of swaps trading per day was taking place regularly, basis TSI.

A relatively new development has also been the introduction of iron ore options, in addition to swaps. The CME group has been the venue most utilised for clearing of options written against TSI, with open interest at over 12,000 lots in August 2012.

Singapore Mercantile Exchange (SMX) has launched the world first global iron ore futures contract, based on the Metal Bulletin Iron Ore Index (MBIOI) which utilizes daily price data from a broad spectrum of industry participants and independent Chinese steel consultancy and data provider Shanghai Steelhome's widespread contact base of steel producers and iron ore traders across China. The futures contract has seen monthly volumes over 1.5 million tonnes after eight months of trading.

This move follows a switch to index-based quarterly pricing by the world's three largest iron ore miners - Vale, Rio Tinto and BHP Billiton - in early 2010, breaking a 40-year tradition of benchmark annual pricing.

In metallurgy, a non-ferrous metal is any metal, including alloys, that does not contain iron in appreciable amounts. Generally more expensive than ferrous metals, non-ferrous metals are used because of desirable properties such as low weight (e.g., aluminium), higher conductivity (e.g., copper), non-magnetic property or resistance to corrosion (e.g., zinc). Some non-ferrous materials are also used in the iron and steel industries. For example, bauxite is used as flux for blast furnaces, while others such as wolframite, pyrolusite and chromite are used in making ferrous alloys.

Important non-ferrous metals include aluminium, copper, lead, nickel, tin, titanium and zinc, and alloys such as brass. Precious metals such as gold, silver and platinum and exotic or rare metals such as cobalt, mercury, tungsten, beryllium, bismuth, cerium, cadmium, niobium, indium, gallium, germanium, lithium, selenium, tantalum, tellurium, vanadium, and zirconium are also non-ferrous. They are usually obtained through minerals such as sulfides, carbonates, and silicates. Non-ferrous metals are usually refined through electrolysis.