Global iron ore prices will remain high for the next five years

The chief executive of London Mining stated that as the supply of iron ore does not catch up with the rapid growth in demand for iron ore in China, global iron ore prices are expected to remain high until 2015. Global iron ore prices are expected to remain high for the next five years.

Mr. Graeme Hossie, chief executive officer of London Mining, pointed out that “as the increase in iron ore supply is not as much as the industry thinks, the rapid pace of urban development in China will help to boost the strong demand for iron ore. Stone is a key material for steelmaking. Although the global macroeconomic environment is unstable, the spot price of iron ore delivered to China has risen to 170-180 USD/ton."

Mr. Hossie stated that “the average iron ore price is likely to remain above US$150/ton over the next four years. He also pointed out that the consensus is that the average price of iron ore remained at US$100 in the last few years of the decade. / Ton is very fair."

He pointed out that several key reasons will enable iron ore prices to maintain their high prices before 2015. The first is that China is the world’s largest steel producer and is rapidly advancing the process of urbanization. Second, China is the country with the highest cost of iron ore mining in the world. It needs to purchase high-priced iron ore in order to encourage domestic mining of more iron ore to make up for the shortage of foreign supplies.

Mr. Hossie pointed out that in order to encourage Chinese domestic iron ore mining companies to extract more iron ore with very low iron content, the price of iron ore needs to be maintained at more than US$150/ton. In other words, Chinese steel companies have to buy more iron ore in order to ensure that domestic iron ore mines with low iron content are being mined.

Mr Hossie added that if global economic uncertainties occur, iron ore miners may need billions of dollars to develop iron ore mining projects. Other market participants have pointed out that iron ore producers still have to face high costs because iron ore mining projects are now in remote areas that require a lot of infrastructure investment. Iron ore mining companies will also face a more stringent mining and environmental review process, so it is possible to postpone project development and implementation plans.

Mr. Hossie pointed out that 2015 is often regarded as a key reference point for the iron ore market because market participants are hard to predict the trend of iron ore prices over five years. He pointed out that he personally believes that before 2015, the supply and demand of global iron ore cannot be balanced.

The British listed company, London Mining, will begin shipping iron ore from the Marampa iron ore mine in Sierra Leone from the fourth quarter. Mr. Hossie pointed out that he expects that the initial cost of mining the iron ore will be US$30/tonne FOB, which will result in huge profits.