Simple facts about Aus Iron Ore exports to China

At Narrowboat Media, there is limited intention to write about the iron ore industry; given it is so well covered in other sources.

However, in a very abridged form, I wanted to set-out some interesting facts about this industry

• Currently China sources 60% of its iron ore from Australia because it has a clear quality and freight-cost advantage vs. Brazil

• In 2020 shipments of iron ore from Australia increased by 31 million tonnes and totalled 867 million tonnes

• China has set about obtaining a major competing source being the Simandou mine (100Mt production capacity, expected to start in 2025/26) in Guinea. Rio Tinto does own 45% of the mine

• Developing this mine is not without operational hurdles

  • In Guinea there are no mines of this scale (e.g. other China backed ventures are c.10Mt capacity)

  • Additionally, to make that happen, they plan to build a $US14 billion ($A18 billion) railway through the Guinean countryside – the likes of which West Africa has never seen before.

• According to Glencore, Simandou will grow to a 200-250Mt exporter over time

• Using these variables– China could replace 12%-20% of Australia’s current supply in 4-6 years’ time from this one mine

For now, China is not going to overnight replace Australia’s iron ore supply. However, their incentives are aligned to search for a replacement.

Losing +100MT (or even 200-250MT) of supply in 5 years’ time will certainly hurt Australia – but it is not apocalyptic (especially given how rapidly supply is growing in 2020-21)

That being the case – when Glencore makes the press that the iron ore market being ripe for disruption; we should watch this space.