Iron Ore Insights: Q4 2012 

Key insights

• With pricing almost doubling in the quarter, accurate short term prediction of iron ore pricing is more art than science.
• As low cost hematite deposits run out, sources of iron requiring greater capital investment and operating costs for infrastructure and/or processing will be needed and change the price point.
• Prices rose in 4Q12 driven by increased iron ore demand from Chinese steel mills. China’s steel production rose in 2012 driven by construction of railways, roads and bridges.
• Iron ore prices are likely to remain on a downward path in coming years after increasing during 1Q13. Downward pressure on the iron ore price is expected in 2H13 due to a combination of anticipated lower steel output and continuous supply growth from the major iron ore miners.
• Longer-term, the same themes still exist, with execution on supply projects continuing to disappoint, and increased expectation from Chinese iron ore imports required to balance the global sea-borne markets.
• Medium-term, the growth in supply is expected to outpace demand, due to mine expansions and increased production capacity in Australia, Brazil and West Africa.