Global iron and steel

Due to a geological event (ie an earth quake) Kiruna iron mine in Sweden is shut, it may not re-open. If it does it isn't likely to be anytime soon.


Australia's kungflu related spat with China is likely to be cutting China off from Australian ore, with Kiruna shut down Australia are probably aware that there is a market outside China that suddenly has demand

Arrse has a diverse range of experts available, my question is basically has an unhappy set of coincidences conspired to screw over China and its dominance of the iron and steel market? Are the two events enough to bugger the Chinese?
 
Due to a geological event (ie an earth quake) Kiruna iron mine in Sweden is shut, it may not re-open. If it does it isn't likely to be anytime soon.


Australia's kungflu related spat with China is likely to be cutting China off from Australian ore, with Kiruna shut down Australia are probably aware that there is a market outside China that suddenly has demand

Arrse has a diverse range of experts available, my question is basically has an unhappy set of coincidences conspired to screw over China and its dominance of the iron and steel market? Are the two events enough to bugger the Chinese?
China will ramp up it's own iron ore production and also take as much of the expanding Brazilian production as it can. The trouble with not using Australian iron ore though is that the Aus stuff is very iron rich indeed, @60% iron compared to about 25-30% for others, which means more energy and cost to get what you want plus more pollution.
 
China will ramp up it's own iron ore production and also take as much of the expanding Brazilian production as it can. The trouble with not using Australian iron ore though is that the Aus stuff is very iron rich indeed, @60% iron compared to about 25-30% for others, which means more energy and cost to get what you want plus more pollution.
Does that not simply drive up the cost of Chinese steel and make it less competitive?
 
The Chinese will just buy more mines in countries that don't have a problem selling off national assets to foreign companies, prime example being Canada. Trudeau and friends don't seem to have a problem with it, just gave the nod for China to purchase a gold mine last week......
 

Grumblegrunt

LE
Book Reviewer
china's need for steel has dropped considerably of late,

they still have the plants they bought off the germans running full pelt as far as I'm aware.
 

Grumblegrunt

LE
Book Reviewer
The Chinese will just buy more mines in countries that don't have a problem selling off national assets to foreign companies, prime example being Canada. Trudeau and friends don't seem to have a problem with it, just gave the nod for China to purchase a gold mine last week......
now that is interesting because china has a habit of keeping the gold it mines domestically.

it's why nobody has a clue just how much gold it does have.

are they going to run it with chinese or canadian labour?
 
now that is interesting because china has a habit of keeping the gold it mines domestically.

it's why nobody has a clue just how much gold it does have.

are they going to run it with chinese or canadian labour?
That’s an interesting question because of the mines location, Nunavut. The Inuit are not keen on outsiders and aren’t fond of anglo’s so not sure how having Chinese about is going to be received, they can make life difficult for those they believe are detrimental to their ways.
 
Sweden is only a minor producer of iron ore. Total Swedish iron ore production amounts to about 1% of the global market. This may be a temporary problem for some of their customers who now have to line up a new supplier, but it's statistical noise so far as the global market is concerned.
The big producers are Australia, Brazil, China, and India, in that order. Between them they account for more than 75% of global production.

There's plenty of spare capacity. Swedish iron ore production could shut down permanently and it would make no difference outside of Sweden.

There's lots of iron ore in the world. Who the big producers are mainly has to do with proximity the market, the presence of good infrastructure to service the mine, and how easily the ore body can be accessed.
 
Still lots of steel to recycle as well.

Speaking of recycling... I've been watching The New Captain Scarlet. Did anyone else notice Lady P's FAB 1 in the scrap yard at the end of the first episode?

That said, Destiny might have the worst case of permanent helmet hair ever, but I still would.
 
That’s an interesting question because of the mines location, Nunavut. The Inuit are not keen on outsiders and aren’t fond of anglo’s so not sure how having Chinese about is going to be received, they can make life difficult for those they believe are detrimental to their ways.
There's currently four mines in Nunavut, and there have been other mines in the past. There are currently three gold mines and an iron ore mine.

The iron ore mine is perhaps one of the richest known deposits in the world. If it reaches full planned production rate it will produce more than Sweden, which puts the Kiruna mine into perspective.



The mine you are referring to is the Hope Bay gold mine. It went into production in 2017.
Nunavut's Hope Bay mine celebrates commercial production with Inuit landowners



Here they are pouring the first gold bar.


About 15% of the employees are Inuit.

The mining company behind it, TMAC, want to sell out because it apparently hasn't been profitable.

Shandong Gold Mining Co. Ltd. are looking to buy TMAC's interest in the mine. However, the sale must be approved by the federal government under both the Competition Act, and the Investment Canada Act (the updated name of the Foreign Investment Review Board). Because the Chinese government has a large minority stake in Shandong, it comes under increased scrutiny under recent changes to regulation.
The acquisition of TMAC by Shandong comes as Ottawa tightens its scrutiny of Canadian takeovers by foreigners.

Last month, the Liberal government said they will subject "all foreign investments by state-owned investors, regardless of their value, or private investors assessed as being closely tied to, or subject to direction from foreign governments, to enhanced scrutiny.”
Currently, the mine is controlled by two big shareholders, an American mining company and an American investment company. So what it amounts to is two American companies wanting to sell the mine to a Chinese company because they don't want to put enough investment into the mine to bring it into full production while the Chinese company are taking a longer view of things.

If the sale to Shandong is approved, and there are no guarantees that it will be approved by Ottawa, Shandong will not be allowed to bring in Chinese miners. A Chinese coal mining company wanted to do this in a proposed coal mine in BC a couple of years ago and they had their permits revoked and the mine did not go ahead.
 
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now that is interesting because china has a habit of keeping the gold it mines domestically.

it's why nobody has a clue just how much gold it does have.

are they going to run it with chinese or canadian labour?
It has already been suggested that the Yuan could become a gold backed currency, which may explain why they have been accumulating so much over recent years. Once they have enough then they can open the vaults up to international audit to prove that they have the reserves to do it. It would make the Yuan significantly more attractive as a reserve currency, something that the Americans are terrified of as it would be a body blow to the petro-dollar and, hence, US interest rates and borrowing capacity.

The Chinese know how to play the long game and I would not be at all surprised if the above happened, its far cheaper, easier and less risky than going to war.

As an aside, the US gold reserves have not been publicly audited since 1953 so no one really knows how much they have either. A betting man might speculate that the Chinese have more than the official figures and the Americans less.
 
There's lots of iron ore in the world. Who the big producers are mainly has to do with proximity the market, the presence of good infrastructure to service the mine, and how easily the ore body can be accessed.
Given Australia's ore output in comparison to China's steel production, how badly would China be hurt by an interuption in supply from Australia?
 
Given Australia's ore output in comparison to China's steel production, how badly would China be hurt by an interuption in supply from Australia?
In the current climate of reduced demand they can wear it for a while. The Aussies will hurt far more than they will.
 
Given Australia's ore output in comparison to China's steel production, how badly would China be hurt by an interuption in supply from Australia?
If you're talking about iron ore production in Australia somehow being entirely stopped, the whole world would be in a bad state, as Australia produces about a quarter of global production.

Here's a chart showing exports and imports of iron ore. This of course is not the same as production, as it doesn't count iron ore that is consumed in the same country as it is produced in. We can see though that if Australia were to stop exporting iron ore to China, they have no viable alternative customers. In turn, China would find it difficult to replace Australia as a supplier. Australia and China are pretty much joined at the hip when it comes to iron ore.


IronOre.png


As we can see though, iron ore is Australia's biggest export.

Australia-Exports.png


Their third biggest, just narrowly behind LNG, is metallurgical coal, which is the type of coal used for steel making. If you add thermal coal to the metallurgical total, then coal overall is Australia's second biggest export. Again, Australia is heavily dependent upon the Chinese market.


MetCoal.png



Australia's recent prosperity has been heavily based on exporting iron ore and coal, these two commodities accounting for nearly a third of their total exports. Demand for these and other commodities has been underpinned by growth in China as they built a century's worth of cities, highways, and bridges in a couple of decades.

That is largely built now though, and demand for steel in China is expected to fall or at best to level off as the economy shifts more to services and technology. There's no other emerging market lined up to take their place for the foreseeable future. India may take up that mantle eventually, but they've a ways to go before they can do that.

The Australians see a significant risk to their own economy from a combination of declining demand from China for raw materials, and a US-China trade war further hampering Australian exports to China.
The prices of Australia’s major resource commodities have recently hit 7- year highs, but are likely to drift lower over the outlook period, due to softer demand and rising supply.

Resource and energy commodity markets have been buffeted by the impact of both US-China trade tensions and supply changes in recent months. Combined with a weaker than expected exchange rate, Australia’s resource and energy exports are set to hit a new record of $285 billion in 2019–20, before falling back in 2020–21.

The world industrial production cycle has continued to slow in recent months, and looks set to slow further. The extent of the likely down-cycle in resource commodities depends on whether China can maintain recent rates of economic growth, and the unfolding of trade disputes of the US with its trading partners.
Again, they see great power struggles manifested in the form of trade wars as being their most serious risk.
The major risk to world growth is an escalation of protectionist trade measures between China/Europe/Japan and the US. A ’no-deal’ Brexit could also cause significant disruption to global supply chains — notably in Europe. The vagaries of the weather will impact on energy commodity usage over the outlook period, however, the ongoing push to lower carbon emissions will unambiguously impact thermal coal demand adversely.
Australia expect to see demand for iron ore in China to decline, as steel production falls and more recycled scrap is used.
China’s steel production forecast to gradually decline

Steel production is forecast to taper lower at an annual average rate of 0.1 per cent, to 926 million tonnes in 2021 (Figures 3.3 and 3.4). Declining steel production is expected to be driven by a range of factors, including moderating consumption, the removal of government stimulus ( which is expected to weigh on housing and infrastructure investment), more stringent environmental regulations, and further reductions in steel mill capacity — including the closure of Liuzhou Steel and Chanjiang Steel in 2021, together accounting for 16 million tonnes of capacity.

China is expected to increasingly use scrap material in steel production, which will diminish demand for imported iron ore and metallurgical coal (Figure 3.3). Higher scrap use will be driven by growing scrap availability, stemming from old construction works set to be demolished and replaced, and old machinery and autos having reached the end of their life span. Government tax incentives and high scrap prices are expected to rapidly bring additional domestic shredding capacity online, and increase the availability of scrap to steel mills over the outlook period. Higher domestic scrap supply will be partly offset by restrictions on imported scrap material

Iron ore prices were fairly good last year due to problems at major mines in Brazil and Australia causing some mines to close (e.g. the tailings dam collapse in Brazil), but that won't last. Demand for metallurgical coal, another major Australian export, will be closely to demand for iron ore, so Australia will get hit twice on that aspect of things
.

So, for the foreseeable future, Australia are closely tied to China economically, and there's nothing they can do to change that. If the Australians cut out iron ore and metallurgical coal exports their economy will collapse.

Australians also have a longer term problem of their market for their main exports being stagnant or decline as steel demand tapers off in China. Australia have had a run of good luck in the past couple of decades in being close to the biggest and fastest growing market for commodities they have a lot of, but their luck may be about to run out.
 
If you're talking about iron ore production in Australia somehow being entirely stopped, the whole world would be in a bad state, as Australia produces about a quarter of global production.

I wasn't, I was asking about what would happen if Australian ore exports to China ceased really.

I probably didn't really appreciate how much Australia produces in comparison to Sweden, what was ambling around in the back of my mind was if the production loss in Sweden would provide an opportunity for Australia to find an alternate customer to China

Thanks to your pretty comprehensive reply I've got the answer! The loss of Karuna production is a fraction of what Australia sends to China.

I have a brother in Australia and I know China is viewed very badly by many Australians, even before Coronavirus.
 
I wasn't, I was asking about what would happen if Australian ore exports to China ceased really.

I probably didn't really appreciate how much Australia produces in comparison to Sweden, what was ambling around in the back of my mind was if the production loss in Sweden would provide an opportunity for Australia to find an alternate customer to China

Thanks to your pretty comprehensive reply I've got the answer! The loss of Karuna production is a fraction of what Australia sends to China.
Australia has no viable alternative to China as a customer for their biggest export. The same is true for a big share of their coal, their second biggest export. Australia have positioned themselves as a major exporter of raw materials, and China is the world's biggest market for those goods.

Or to put it another way, Australia's recent exceptional prosperity is founded almost entirely on their proximity to the Chinese market. As noted in an Australian government report which I posted above, one of the biggest threats to Australia is the economic fallout they would suffer from any trade conflict between the US and China. There is no viable alternative market for their major exports.

Around the mid to late 20th century when the global steel industry was heavily concentrated on either side of the North Atlantic, the huge iron mines of Labrador and Quebec exported ore to service those steel industries. As those steel centres went into decline however, so did those iron mines. Here's an estimate of the iron ore resources of the Labrador Trough, which they estimate as "more than 80 billion tonnes".
More than 80 billion tonnes of known iron ore resources with excellent exploration potential (...) Vastly underexplored on a district scale.
Ore quality is superior to Australia and Brazil.
High-quality ores
Low phosphorous, alumina, sulphur and alkalies
High Fe content concentrate and pellets
Superior quality relative to Australian and Brazilian product offsets freight disadvantage (for China markets)
Here's an estimate of the iron ore reserves of Australia, which they put at "52 billion tonnes".

The difference between resources and reserves is that the first is a measure of how much ore is there, while the second is a measure of how much is profitable to mine under today's prices and market conditions. Comparing resources to reserves is a bit shaky, as mining is about making money and if it isn't profitable then it's not going to get mined.

The comparison though provides some indication that western Australia and the Labrador Trough region both contain roughly comparable amounts of iron ore. The difference in their respective economic histories results not from geology, but from proximity to market. Australia is superbly positioned to service the Chinese market, while the Labrador and Quebec mines were as far from that market as is possible to get when it comes to shipping. Thus as Labrador's mining star fell, that of Australia's rose.

I have a brother in Australia and I know China is viewed very badly by many Australians, even before Coronavirus.
This comes as no surprise to me. Every smaller country that finds itself in the sphere of influence of a larger one comes to dislike the larger country to some extent. Ask the US's neighbours about what their history has been like. Ask Russia's, Germany's or Japan's for that matter.

Canada has extensive regulations on foreign investment, communications security, media, and other areas which were put into place entirely to limit US attempts to dominate Canada. The US regularly tries to threaten and bully Canada and makes claims against our territory. They put arbitrary tariffs on our exports to them in contravention of treaties they have signed, and laugh at international legal rulings which go against them. Go back 150 years and we had a century of warfare with them, both open battle and insurgency and terrorism. They're not going away so we've had to get used to dealing with them.

For that matter Australia had a history of resentment against the UK over what they saw as UK domination, despite what can only be described as a close and mutually beneficial relationship.

Australia are going to have to get used to dealing with China, just like they are going to have to get used to dealing with India as that country's star rises over the course of this century. Things are probably going to get increasingly dicey in that part of the world as the centre of conflict has moved from Europe to Asia.
 

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