But that could change from next year as a wave of cheap supply starts to build in West Africa, lowering the industry’s average costs and forcing prices to better reflect the long-term decline of China’s steel industry, the biggest consumer of iron ore.
The world’s largest untapped ore reserve in Guinea’s Simandou — once dubbed a “Pilbara killer” — is intensifying preparations for production. The project could deliver 5 million tonnes starting in 2025 before ramping up steadily to 90mt a year in 2028, according to Macquarie Group.
Nameplate capacity is 120mt, a level that could be reached in five to seven years, said Liz Gao, a senior analyst at consultancy CRU Group. By that time, “the market will rebalance, with high-cost producers leaving the market to make room for these new volumes from Simandou”, she said.
Digging up iron ore, the key ingredient to make steel, has been a fantastic business for some of the world’s biggest miners. China’s rapid growth, and a laserlike focus on lowering costs, has delivered bumper profits year-in, year-out for producers like Rio Tinto and BHP. But a combination of fading demand in China and swelling supply now threatens to upset the outlook for their main profit driver.
