High Grade Iron Ore Witnesses Broadening Demand, Limited Supply, and Rising Global Prices: Is Opportunity at Doorstep for Magnetite Mines?

High Grade Iron Ore Witnesses Broadening Demand, Limited Supply, and Rising Global Prices: Is Opportunity at Doorstep for Magnetite Mines?

“China produced the highest amount of steel in the world, accounting for almost half of the total global crude steel production in the year 2018.”

Changing climate, societal impact of harmful pollutants, and the Chinese government’s recent move towards more sustainable steel production are among the factors that are driving the global demand for high-grade iron ore pellets. Industries are increasingly shifting their focus to more sustainable and environmentally conscious manufacturing practices.

In a race to become the world’s largest economy, China, also a global economic powerhouse, is currently dealing with an enormous amount of industry-related air pollution, resulting in a devastating impact not only on the citizens’ health but also on crop yields.

Government Policies and Role of International Organisations

The current Chinese Government has taken measures to tackle the issue of rising pollution and risky environment for human survival. China’s President Xi Jinping declared war on pollution, which is among the “three critical battles” that China is currently focusing upon.

One of the key measures taken to curb pollution is the enforcement of new ultra-low emission (including particulate matter, sulphur dioxide and nitrogen oxide) standards on steel producers - a crackdown on the country’s biggest polluting industry.

These emission standards stand as an advantage for high-grade iron ore producers with increased price premiums for these products.

International Maritime Organization Fights Pollution

In order to raise awareness, take stock of the preparations for the IMO 2020 rule, and discuss the role of alternative fuels in the decarbonisation of world-wide shipping on a global level, the International Maritime Organization hosted a Symposium on IMO 2020 and Alternative Fuels.

Through limiting sulphur oxide emissions from ships, it is further expected to reduce air pollution and result in a cleaner environment, while also reducing particulate matter - tiny harmful particles formed when fuel is burnt.

Global steelmakers, especially in Europe, are pondering upon ways to use more hydrogen to lower carbon emissions.

In contemporary times, many breakthrough technology projects are in progress in different parts of the world with similar goals with different approaches being categorised under various methods like Hydrogen as a reducing agent, Carbon Capture and Storage (CCS), Carbon Capture and Utilisation (CCU), Biomass as a reducing agent and Electrolysis.

By the setting up of net-zero emission targets by 2050, more than 60 countries across the globe are looking to limit pollution from heavy practices, like steel manufacturing. Specifically, Sweden’s government-funded long-term commitment to zero-carbon steel production is fuelled by green hydrogen instead of using coal, eliminating the pollution of traditional sintering while transforming low-grade iron ore into steel.

Additionally, meeting ESG criteria has become paramount for many companies across the globe. To that effect, reducing carbon footprint has been a major strategy. Shifting to high grade iron ore would aid steel companies to meet their carbon footprint commitments.

How does this rising demand impact the already constrained supply?

In order to support steel manufacturing plants to complete the upgrades required to meet the new emission standards, the Chinese government has incentivised its steel manufacturing plants.

According to Reuters:

To be noted, only limited number of iron ore projects are in the development and exploration stage outside Australia and Brazil with the ability to supply high-grade iron ore to the global steel market.

In light of the above developments in the Chinese as well as international markets, Magnetite Mines Limited (ASX: MGT) believes that the Company has the opportunity to become a leading global supplier of magnetite products to China’s steelmaking sector.

Magnetite Mines’ 100% owned Razorback High Grade Iron Ore Concentrate Project is well-placed in Australia’s developing iron ore mining area, Braemar, which comprises of a sequence of alternating bedded, tillitic, and interbedded magnetite units representing cycles of glacial advances and retreats.

The Company has progressed well towards the advancement of its Razorback Project and is well-placed to draw benefits post consolidation and strategic rebranding.

Moreover, MGT has exclusive rights to the ore-sorting technology commercialised by NextOre in partnership between CSIRO and industry players Advisian and RFC Ambrian, focussed on producing the next generation of bulk ore sorting technology. The technology is well-suited for the bulk ore sorting.

Bottomline

The shift towards environmental policies by several countries, especially China, to meet their environmental and productivity goals, has compelled steel manufacturers to opt for cleaner, more cost-effective iron-ore materials for production. The need for new resources is expected to bloom amidst the tightening global supply of high-grade iron ore in order to match the rising demand.

A small portion of the world’s total iron ore is believed to be high-grade, with Australia holding a major chunk of the same. The high-grade iron ore products of Australia are expected to be an enormous asset to the economy through the year 2020 as we look forward to witnessing the world to evolve into less polluting and more cost-effective methods for manufacturing steel. On the back of such structural developments, MGT has a great opportunity as the Company advances its highly prospective Razorback Project.


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