Race on to harvest bit players
SPECIALTY METALS The big iron ore producers are expanding rapidly, and so are specialty suppliers, writes Robin Bromby
IF there is to be an end to surging steel demand in the coming years, no one has told the big iron ore players. Rio Tinto, BHP Billiton and Brazil’s CVRD are all engaged in ambitious expansion plans, and hordes of new and aspiring producers are springing up.
Australian companies are opening new iron ore provinces at home in the Midwest region of Western Australia and in South Australia, and developing ambitious projects abroad — including large mine plans in Mauritania and Cameroon. In Cameroon, Perth- based Sundance Resources has started a 20,000m drilling program at the Mbalam deposit. In the Pilbara, Fortescue Metals Group — not yet a producer — has lifted its ambitions from 45 million tonnes a year to 200 million tonnes.
Predictions of price falls in iron ore continue to be dashed each successive year. Goldman Sachs is very bullish on prices: it sees the iron ore market staying tight through 2009, especially for steel makers buying on the spot market.
Smaller Chinese steel mills which paid about $ US65 a tonne last year for iron ore fines from Brazil and India are now paying over $ US100. Goldman Sachs believes prices will rise for another two years, and any downturn is not likely until fiscal 2011.
The big question is the extent to which China will influence supply and prices. It mines 520 million tonnes a year, but much of it very low grade.
As part of its drive to improve the environment and reduce energy use, China may well close some of these lower grade operations. That country apart, Brazil and Australia dominate the iron ore industry and are the largest players in the seaborne iron ore business.
Specialty steel metals are getting no less attention. Australia, which has no operating vanadium mines, is now likely to see three opened up over the next few years in Western Australia, along with vanadium production as a by- product of new uranium operations.
As with other such specialty metals, vanadium’s demand is closely linked to that of steel. The danger with any of these metals is that, because quantities are small relative to iron ore, too many players will try and develop mines, leading to surpluses.
Australia does not at register on the world vanadium league. Its one mine closed in 2004, but three companies are in the race to get production of this metal, which is primarily used as an alloying agent for iron and steel. Precious Metals Australia is reviving the Windimurra mine, Aurox Resources is running second with its Balla Balla deposit and Reed Resources has the high grade Barrambie project.
Tungsten, molybdenum and chromium are all becoming increasingly familiar terms to Australian mining investors.
There is no substitute for manganese and chromium. Ninety per cent of manganese produced goes into steel, where it both prevents oxidation and also works as an alloy. World reserves are dominated by South Africa and Ukraine, with Australia in fourth place after India.
Chromium’s largest end- use is in stainless steel, and is important to strategic super alloys. There are potential substitutes for tungsten in strengthening steel drawing on molybdenum and titanium, but these can involve greater cost and losses in terms of quality of the steel.
Demand for tungsten is likely to increase, as will prices, now that China has decided to limit exports to conserve its resources. The impact of such a move will have is apparent from the 2006 mine production figures: of the 73,300 tonnes mined, 62,000 tonnes came from China. The next biggest producer, Russia, recovered 4500 tonnes of tungsten
In every part of the global steel industry, the story is the same: everyone is working on the basis that the steel boom will continue. Jindal Stainless of India, for example, is planning to expand its stainless steel production capacity threefold, and its existing chromium mine in Orissa will be unable to meet Jindal’s demand. The company is scouring the world for new mine projects.
Chrome is the feedstock for ferrochrome, which goes into stainless steel. India’s steel ministry has recommended a complete ban on chrome ore exports from 2009.
According to the US Geological Survey, 95 per cent of the world’s known chromium reserves are in either Kazakhstan or southern Africa; when it comes to production, South Africa, Kazahkstan, Turkey, India and Pakistan account for 80 per cent of world output.
Australia is a very small player in the chrome ore business. Consolidated Minerals accounts for 2.5 per cent of world supply of 18 million tonnes a year with its capacity to produce 250,000 tonnes a year. The Coobina deposit in the Pilbara was first identified in 1925, but mining did not begin until 1992.
ConsMin is an interesting story in that the former management team set out to get involved with as many steel inputs as they could. First the company began mining manganese at Woodie Woodie and then the chrome, following up by acquiring iron ore ( the Mindy Mindy deposit which remains undeveloped while the battle goes on for access to BHP’s nearby railway) and nickel.
There is another Australian player in the chrome business. The listed Chrome Corp is hoping to re- open the Ruighoek mine northwest of Pretoria in South Africa, closed in 1993 when chrome prices were low.
The Perth- based company has hopes that there could at least 28 million tonnes of chrome ore — and there are two other seams that have not been evaluated.
And then there’s molybdenum, another metal in which Australia is at present a nonproducer but is about to become a significant player with several mine projects in various stages of development. The main use for this metal is in steel making.
According to the British- based metals analyst Roskill Ltd, about 28 per cent of molybdenum goes into stainless steel, 15 per cent into alloy steel, with other steel uses accounting for a further 28 per cent. A growing use for molybdenum is in catalytic applications.
In 1990, the world consumed about 100,000 tonnes a year of molybdenum; by 2005, the figure was 181,000 tonnes. Chinese consumption doubled between 2001 and 2005. The US, Japan, Germany and China together consume about 50 per cent of all molybdenum produced.