Headlines Recently Talked About an Oversupply of Iron Ore
Over the last several years, the search for iron ore intensified, and because of demand from China and Eastern countries, there was great interest in new deposits prospected in Canada and elsewhere.
Recently headlines had two themes. Firstly, the sheer number of new refineries and steel plants built or being built in China, and secondly, the fear that a slowdown in China would reduce demand and accordingly the demand for iron ore would diminish. I think this is an over reaction. As an example, consider New Millenium Iron Corp.
World Demand For Iron Ore
One of the new world class iron ore developments is New Millenium Iron Corp (NML), which is located in Quebec, Canada, near the Labrador border. The company has a number of excellent projects, but the one nearest production has an Indian Company as co-venturer.
If the reader thinks that only China creates a demand for Iron ore, consider that the NML partner and investor is an Indian company. Consider also the increasing demand from a growing economic powerhouse and exporter of cars and so much more – South Korea.
Some Details on the NML Indian Co-Venturer
In September 2008, NML signed a strategic partnership agreement to develop its DSO Project with global giant Tata Steel, one of the world’s largest steel companies. Tata Steel is based in India and is one of the world’s most geographically diversified steel companies.
In addition to this project, several other explorers for iron ore have established themselves in Quebec/Labrador, Canada.
Iron ore demand will stay strong With China still dominating
While much focus is being placed on the current financial crisis, long term growth in China and other parts of Asia will see demand for the metal continue to grow
Author: Geoff Candy, Posted: Thursday , 08 Dec 2011, LONDON –
Short of a complete meltdown in China, which he believes is highly unlikely, Raw Materials Group CEO, Magnus Ericsson, says iron ore demand will continue to grow for at least the next 20 years. Speaking to Mineweb at the Mines and Money London conference, Ericsson says that while growth in the Asian giant is bound to slow, the demand for iron ore will remain.
He says, five to 10 years ago, China produced 300 million tonnes of steel every year and they were growing at 10%, a growth rate that implied a certain level of demand for iron ore every year. “Now,” he says, “they’re double that volume annually in steel production, and even if growth rates then decline to half, that ends up with the same number of iron ore mines having to come on stream every year.”
China’s main rival in the race for iron ore is, of course, India. But, Ericsson says, while India is likely to play an important role, it is unlikely ever to quite match China.
The supply side of the equation is just as positive from a pricing point of view because, it is becoming tougher and tougher to find deposits and get the ore to the right places. “It’s getting more and more difficult to get that iron ore capacity on stream. The mines are further away from export ports, the grades are declining, there even sometimes underground operations necessary and they are in more difficult climatic conditions.”
Investing in Iron Ore
While gold, silver and copper dominate the headlines, perhaps the investor should look at some basic value investments, such as iron ore, where a project is fully funded, a take-off agreement is in place, the location is second to none, the political situation is one of the most stable in the world, and the partner is one of the largest companies in the world.
Investing in Copper
Another project that merits consideration is Baja Mining Corp (BAJ), a Canadian mine development company with a 70% interest in the Boleo copper-cobalt-zinc-manganese project located near Santa Rosalia, Baja California Sur, Mexico. Boleo is fully funded, currently under construction and targeted for copper production in early 2013.
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