Annual production of iron ore should reach 2.4 billion tons due to production growth in the second half of the year
Growth in global iron ore production in the second half of 2022 should partially compensate for the decline in the first half of the year. Due to this, the annual production will reach the index of 2021 – about 2.4 billion tons. This is stated in the Mysteel study.
In January-June 2022, iron ore production worldwide decreased by 2.7% compared to the first half of 2021, to 1.188 billion tons.
Most iron ore producing countries experienced production disruptions in the first half of the year amid the war in Ukraine, the coronavirus pandemic and adverse weather conditions. Production was most affected in Brazil, Russia, Ukraine, China and South Africa.
Brazil, the second largest producer of iron ore, reduced its production by 5.6% y/y in January-June 2022 – to 176 million tons.
Earlier, Brazilian Vale lowered its production forecast in 2022 from 320-335 million tons to 310-320 million tons. The company explained this by a variety of unfavorable factors that occurred in the first half of the year. Among them are the sales of its Midwestern system, the impact of a heavy rainy season, and measures to dampen inventory moisture.
Non-core countries produced 567 million tons of iron ore in the first half of 2022, which is 3.1% less than in January-June 2021. Production cuts in these countries accounted for more than half of the decline in production in the first half of the year.
Mining companies in Ukraine in the first half of the year reduced iron ore mining by 27.3% y/y – to 30.1 million tons. Russia produced 44.1 million tons of iron ore during this period (-11.4% y/y).
China for the first half of 2022 reduced iron ore production by 3.6% y/y – to 149 million tons. The indicator decreased due to the shutdown of mining enterprises to reduce emissions during the Olympic and Paralympic Games.
At the same time, as Mysteel predicts, global iron ore production will recover in the second half of 2022, especially in the fourth quarter. This will be facilitated by the work of new mining projects around the world, as well as favorable weather in Brazil.
China in the fourth quarter of 2022 plans to increase production by 12.5% y/y – up to 78.3 million tons. New production capacities are being put into operation in the country, seeking to increase the production of iron ore to 370 million tons by 2025.
“On the other hand, iron ore production in non-core countries may continue to be limited by the Russian-Ukrainian conflict and rising production costs for mining companies due to high energy prices,” concludes Mysteel.
As GMK Center reported earlier, the rating agency Fitch expects that global iron ore production will grow by an average of 2.7% in 2022-2026 compared to a decline of 1.3% in 2017-2021. According to this scenario world production of iron ore will increase by 361.7 million tons in 2026.