Chinese angle - iron
May 27, 2014
In the area north of 56 there are several iron ore mines being planned, one under construction. As the workshop of the world, China plays a huge role in the development (or not) of iron ore mines. Here’s the Chinese angle on iron ore.
- Prices. Exports to and sales in China by US corporations have turned materially lower after remaining stable since early 2013 - indicating weakening demand. Anecdotal evidence suggests that a similar slowdown has also occurred for Japanese and euro area firms selling to China. The most worrying indicators however are the key industrial commodity prices. Futures on iron ore sold at China’s ports fell below $100 for the first time in years.
- Markets. China now represents around 58% of global iron ore demand and nearly three quarters of the seaborne trade, estimated at just over 1.1 billion tonnes.
- Capital. In response to China’s growing demand, the push to expand global export capacity and the willingness of Chinese investors and banks to provide funding to projects over the past five years has resulted in a surge of new supply. This has come from both the traditional iron ore producing regions such as Australia and Brazil and also to a lesser extent from less developed regions, such as Africa and Canada. Canada is a minor producer <3% of world market production.
- Skilled employees. China is willing to provide skilled engineering, project management and trades employees for large international projects. This may occur in Greenland at London Mining’s Isua project.
- Infrastucture. China can built mine infrastructure and barge it to North America. One major project plans to do this very thing.
Meanwhile in the north iron ore exploration, development and mining activity continues in earnest:
- Baffinland Iron Mines Corporation could begin its first phase of extracting ore from the Mary River mine site this summer. Baffinland plans to ship 3.5-million tonnes of ore per year through Milne Inlet, using ships that carry between 70,000 and 90,000 tonnes. They expect to use about 55 ships during the open water season, in addition to ships carrying sealift supplies and fuel.
- London Mining’s $15B Isua project has received approval to proceed from the Greenland government. During the construction phase up to 3,000 imported workers would assist the building of the mine. The project would employ up to 450 local people once in steady state operations. This number would build over the first five years of the mine’s life as local people are trained in the skills to take the place of overseas workers. The Isua iron ore project located 150 km.s north of Nuuk, the capital of Greenland.
- The Lac Otelnuk Iron Project is located 170 kilometers north of the town of Schefferville, Quebec. Adriana Resources Inc. has a huge iron ore deposit and is being aided by Hong Kong based WISCO International Resources. This project is many years away from development and would need a rail link to the coast.
- Oceanic Iron Ore Corp. has a large attractive iron ore deposit on Ungava Bay in Nunavik, Quebec. The firm is actively looking for a Chinese partner to develop the project.
- Advanced Exploration has a billion tonne iron ore deposit identified in Nunavut. For its Roche Bay project the company has partnered with Chinese-owned SOE XinXing Pipes Group. The Chinese connection will help with capital requirements of $1.4B plus expertise on getting milling modules built in China and shipped over by barge. The company is looking for a mine permit this year and some site preparation work to begin in 2014.
China’s importance in the world iron ore market cannot be over-emphasized. The downturn in economic activity in China may put a damper on developments. It remains to be seen to the extent this will happen.
Interestingly, the Nunavut projects are advancing quickly, the one in Greenland is slower while those in Quebec are lagging.
- a)http://soberlook.com/ see "Fresh lows for industrial commodities, other indicators still point to persistent risks to growth in China"
- c)http://arcticjournal.com/oil-minerals/620/greenland-looking-bust-myth-chinese-miner and http://arcticjournal.com/oil-minerals/210/greenland-approves-15bn-iron-mine