Ferocious global appetite for iron ore to return

“By 2025 we believe China and other emerging nations could push seaborne iron ore demand up 250 per cent from current levels,” BHP Billiton’s head of commodity analysis, Vicky Binns, said.
China’s “ferocious” demand for iron ore would be the main driver behind the annual one billion rise in demand.
“In 2009, above all other years, the steel story is about China,” Binns said at an online presentation.
“China has moved from producing around 37 per cent of the world’s steel in 2008 to producing 49 per cent of the world’s crude steel in this year to date.”
Imported iron ore had made up 55 per cent, or around 450 million tonnes, of total volumes used by China’s steel mills in 2008.
In the six months to the end of June this year alone, imported ore accounted for nearly 70 per cent of total volumes at nearly 600 million tonnes.
“The majority has gone to feed ferocious growth in Chinese steel production," she said.
"Only five million tonnes of that has gone into port stockpiles.”
Stockpiles of iron ore in China have been of great interest to the dry bulk industry this year as they are thought to indicate the pace of steel production.
In BHP’s just-released annual report, chief executive Marius Kloppers said, “The major economies are starting to rebuild their inventories in sequence, led by an early recovery in China and we may see a more predictable demand scenario for our products in the coming financial year.
"However, we do not expect a return to the same buoyant demand conditions that prevailed before the global financial crisis, or a return to record global growth rates within our forecasting horizon."
He made particular mention of growth forecasts for China's economy as the region accounts for almost 20 per cent of BHP Billiton's revenue and up to 50 per cent of the world's raw material consumption.
BHP reported a net profit for 2009 of US$5.9 billion, down from its record result of the previous year of US$15.4 billion. The fall was attributed to low commodity price and lower demand for BHP's products.
It reported a profit from its operations, excluding exception items, of US$18.2 billion and margins on this profit of more than 40 per cent. Dividends were increased by 17.1 per cent to 82 US cents per share.
BHP chairman Don Argus, said in the report, "We have enviable balance sheet strength. At June 30th, 2009, gearing was 12.1 per cent and we have an 'A' credit rating with significant funding capacity.
"While the global economy is showing signs of stabilising, the large developed economies are not expected to show real growth until at least the end of 2010."
Argus described the company's safety performance as "simply unacceptable", with seven fatalities - this compares to 11 the previous year.
The report also stated that BHP's pipeline of projects in execution is valued at around US$14 billion, and the company intends to invest US$10 billion in captial and exploration expenditure in FY2010.
BHP also announced that it has seen a boost in the total ore reserves at its Olympic Dam mine in South Australia.
According to the report, proven and probable ore reserves at the mine have increased to 589 million tonnes from 473 million tonnes at the same time a year ago.
The increases are in both copper and uranium, the total reserve comprising 188 million tonnes of proven ore, and 401 million tonnes of probable ore.
BHP’s Draft Environmental Impact Statement for the Olympic Dam expansion is configured for production of 2.4 million tonnes per annum (mtpa) of copper concentrate; 750,000 tpa of refined copper; 19,000 tpa of uranium oxide; 800,000 oz per annum of gold bullion; and 2.9 million oz per annum of silver bullion.
The reserve increase lifts the estimated mine life to 54 years, up from last year’s forecast of 43 years, BHP said. The gain is “due to additional mineralization being available for conversion to probable reserves,” the company said.

Including material from Lloyd’s List Daily Commercial News - www.lloydslistdcn.com.au