Home » According to Citigroup, iron ore prices are predicted to increase to $150, resulting in industry-wide losses that steel mills are reluctantly facing.

According to Citigroup, iron ore prices are predicted to increase to $150, resulting in industry-wide losses that steel mills are reluctantly facing.

Russia has the largest proven iron ore reserves in the world, with the Kursk geomagnetic anomaly accounting for 56.8% of the country’s total iron ore reserves. Chinese steel mills have suggested transporting iron ore from the Kursk mine via the Don River to Black Sea ports and then to southeastern steel mills in China, which could still compete with Brazil in terms of transportation costs. However, nearly 90% of Russia’s iron ore resources are controlled by its major domestic steel mills, which are not willing to export primary mineral resources to the outside world. As a result, Russia’s annual iron ore exports are only 20 million tons, with China accounting for 12 million tons.

Kazakhstan, with proven iron ore reserves of about 16 billion tons, ranks fourth in the world after Russia, Australia, and Brazil. The average grade of Kazakhstan’s iron ore exceeds that of Australia and Brazil, reaching more than 65%. Kazakhstan’s iron ore deposits are concentrated in the Kostanai Oblast in the north, as well as in the Aktyubin and Karaganda Oblasts in the center. The Alimutu and East Kazakhstan Oblasts, close to the Xinjiang Autonomous Region of China, are also rich in hematite ores that have yet to be developed.

Kazakhstan produced about 13 million tons of iron ore per year until 2021, meeting domestic steel mills’ needs and exporting in small quantities to the Magnitogorsk steel plant. After the Russia-Ukraine conflict broke out, Kazakhstan stopped exporting iron ore to Russia, incurring strong resentment from the Russian side. In addition, the European Union has announced to stop importing Russian steel products, causing a difficult situation for Russian steel mills. Kazakhstan’s iron ore seems to have only one option, which is to go all the way east to Xinjiang.

In 2021, Kazakhstan’s iron ore mining company Kazakh Steel Plc was listed on the Hong Kong Stock Exchange, with a prospectus stating that the company’s iron ore project’s proximity to China would enable cost-effective transportation of iron ore to the northwest region of China. By 2026, when the company’s iron ore is commercially mined, it is expected to sell at a more competitive price than Australia, Brazil, and South Africa, which are the major iron ore importers to China. Kazakhstan Steel Plc expects to export most of its iron ore to China. Existing iron ore mines in Kazakhstan are already delivering iron ore to steel mills in Xinjiang and Ningxia, China.

In 2021, Kazakhstan State Railways announced that both sides agreed to start shipping iron ore to China using the China-European train from mid-February that year and gradually regularize its operation to increase rail freight volume. In 2022, Kazakhstan’s iron ore exports to Russia fell from 86% to 17%, and to China from 16% to 77%, which could have an impact on ore pricing and potentially affect steel prices.

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