Iron ore miners have suffered for a while. Cheap imports and global steelmaking overcapacity have dragged down prices for domestically manufactured steel, thereby reducing demand for iron ore. However, the industry is expected to see robust growth through 2023 for three reasons.
Tariffs Tax Imported Steel
In March 2018, the US government imposed steel and aluminum import tariffs of 25% and 10% respectively for most countries. The tariffs raised steel prices in the US market, which is expected to crimp overall demand for steel. However, the new pricing environment caused by the tariffs is making domestic steel more competitive relative to imports, which will shift some demand to domestic supply. This demand increase for domestic steel will support iron ore mining to sustain production.
China Cleans Up
In addition to the US tariffs, China recently imposed stricter emissions control regulation on its steel industry. The new standards resulted in the shuttering of producers that were too small or heavily leveraged to afford the requisite emissions technology. The Chinese government has also cracked down on illegal induction furnace steel plants. Since these plants use scrap as a feedstock, the proportion of steel manufactured with virgin ore in China is expected to rise.
China’s new regulations have also increased demand for iron ore pellets and lumps. By closing down the most environmentally damaging producers, the Chinese government unwittingly encouraged additional use of US iron ore pellets. Iron ore pellets and lumps require less processing to turn into steel compared to iron ore fines (small particles of iron ore), which must be sintered (melted together) before being used in a blast furnace. High-quality iron ore pellets do not need to be sintered, which reduces emissions generated during the steelmaking process. To reduce emissions, Chinese steelmakers are demanding more high-quality iron ore, which has raised the price of US pellets.
EAFs Consume More Ore
While electric arc furnaces (EAFs) are widely replacing basic oxygen furnaces (BOFs), and EAFs typically use more steel scrap than iron ore as input material, EAFs are increasingly manufacturing products that require higher purity material than scrap will allow. EAFs are shifting from traditional long steel products (e.g., rods, bars) to flat products, such as sheets, along with more complex value-added products. More complex items require a pure iron feedstock, and scrap is often alloyed, so it can be too impure for the products being made. To solve this problem, EAFs are turning to purer sources of iron ore, encouraging iron ore mining activities.
The imposition of tariffs, increasing environmental regulation in China, and growing use of iron pellets in EAFs are all driving gains for iron ore uses, which is proving a boon to domestic companies. For example, Cleveland-Cliffs – the largest iron ore mining company in the US – cited improved demand for iron ore in the Great Lakes region when it broke ground on a new hot briquetted iron plant in Ohio in April 2018 (hot briquetted iron is a feedstock of EAFs). As long as conditions continue, the future looks bright for iron ore mining.
Want to Learn More?
We have you covered! For additional information and analysis of US industry trends, see Mining & Quarrying: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. This report forecasts to 2023 US mining and quarrying materials handled in metric tons of material at the mine or quarry level. Material handled refers to the excavated volumes of metal ores, industrial minerals, and waste. Total material handled is segmented by targeted resource in terms of:
- industrial minerals
- sand and gravel
- phosphate rock
- other industrial minerals such as gypsum, industrial clays, and salt
- metal ores
- iron ore
- other metal ores such as lead, lithium, magnesium, tin, and zinc
To illustrate historical trends, total materials handed, the various segments, and trade are provided in annual series from 2008 to 2018.
Mining and quarrying for fuel sources (e.g., coal) are excluded from the scope of this report, as are oil and gas extraction. Re-exports of mined materials and waste are excluded from the scope of this report.
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About the Author
Owen Stuart is a Market Research Analyst with Freedonia Focus Reports. He conducts research and writes a variety of Focus Reports, and his experience as an analyst covers multiple industries.