The iron ore market is enjoying its golden period with the current iron ore prices bagging a tidy profit for its suppliers. A vast majority of iron extracted from iron ore is used in the production of steel which, in turn, is used in the manufacturing of buildings, automobiles, ships, furniture, locomotives, and consumer products. The global iron ore market is growing at a steady rate of 2.3% for the forecast period of 2017 to 2021. However, the growth of this market in North America is mediocre due to moderate growth of end-user industries.
Increasing Use of Recycled Steel
An increasing tendency of manufacturers resorting to using recycled steel has halted the growth of this market. SpendEdge report on Global Iron Ore Category – Procurement Market Intelligence Report states that around 37% of the global steel production is recycled steel which is influencing the demand for iron ore.
Antidumping of Steel
Governments of various countries in North America and APAC regions have enacted laws that pertain to the imposition of anti-dumping duties on steel products. Consequently, the steel and iron ore export have been hampered due to such anti-dumping laws. China has faced a significant blow due to such laws as it is the biggest importer of iron ore.
Huge Capital Requirements
Iron ore mining requires substantial capital investments due to energy-intensive nature of the extraction process. For instance, the average cost of an iron ore project was around US$236/tonne of capacity in 2014. So in order to set a lower iron ore price, suppliers need to have large production to achieve economy of scale. Such large capital requirement and investments act as a major growth constraint for this market.
Land Dispute in Developing Countries
Getting hold of land from local communities for mining in developing countries such as India and China is an arduous task. For instance, POSCO in India canceled its plan of setting up a US$12 billion for the iron ore project due to local dispute and approval of lease issue. Such issue poses as a growth constraint as around 70% of the mining sites are in the region with water stress affecting the supply of iron ore.
Read more about the challenges in iron ore market along with key suppliers, cost modeling, procurement market intelligence, pricing insights, and procurement insights in SpendEdge’s upcoming report on the global iron ore market.