Thesis is submitted in partial fulfilment of the requirements for the degree of Master of Science in Engineering to the Faculty of Engineering and the Built
Environment, School of Mining Engineering, University of the Witwatersrand, Johannesburg, 2018 / Iron ore prices rallied from USD15/DMT during 2004 and experienced a significant
drop from USD 140/DMT during the latter part of 2013. The purpose of the work is to
identify the key drivers impacting on iron ore demand globally. Understanding the
supply and demand balance and impact on price, is key to informed decision making
relating to the iron ore business. The research methodology applied largely followed a
quantitative methodology. Key drivers of iron ore demand, supply and demand
balance and the impact on price were evaluated. The method applied consisted of
gathering data from secondary sources and a detailed quantitative analysis on GDP,
stage of economic development, steel consumption, supply and demand of iron ore
and intensity of use.
Approximately 98% of all iron ore is used for steel making and on that basis steel
consumption is the primary driver for iron ore demand. Steel is mostly used for
construction and manufacturing and is driven by emerging economies of which China
is currently the largest contributor. Global GDP growth correlates well with steel
consumption and is primarily driven by emerging economies. Urbanisation was and
still is a key driver for construction in China, to provide housing and related
infrastructure for transportation and services. Scrap steel recycling, currently at 15%,
affect the demand for new steel and indirectly iron ore. Iron ore is abundant and can
easily meet the demand. The significant growth from 2004/5 to 2013/14 and the
unprecedented demand for steel resulted in elevated iron ore prices, introducing high
cost iron ore, predominantly from Chinese State owned companies. From late 2013,
the iron ore prices reduced significantly. This was mainly due to the steel consumption
in China slowing down; delivering of large scale, low cost iron ore projects in Australia
and Brazil and a significant reduction in oil prices.
The key drivers impacting iron ore demand is: global GDP growth, industrialisation
and urbanisation of emerging economies, recycling of steel, supply and demand
balance of iron ore, the cost of production and the price of global iron ore. For the
medium term outlook, the iron ore market will be structurally over-supplied and, as a
result, the demand could be met at significantly lower cost of production levels than
that seen during the period leading up to the price collapse in 2013. This is primarily
because of the increase in low-cost supply from the major suppliers displacing higher
cost producers. China will continue to grow and drive the global demand for steel and
iron ore during the medium term albeit at much lower rates when compared to the last
decade. The demand for steel will increase until 2020 according to various analyst
views. The iron ore prices are expected to trade between USD50/DMT to USD70/DMT
from 2016 to 2020 mainly because of the over-supply situation and demand being
mostly met by large scale, low-cost producers. The decision around the continuation
of high cost, state owned Chinese iron ore producers, new large-scale low cost
production and the oil price will impact on the price outlook. / MT2018
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/24186 |
| Date | January 2018 |
| Creators | Nortje, Petrus Gerhardus |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | Online resource ([13], 127 leaves), application/pdf, application/pdf, application/pdf |
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