Global Iron Ore Markets

According to the U.S. Geological Survey, world resources of iron ore are estimated to exceed 800 billion t of crude ore containing more than 230 billion t of iron. Steel production is the driving force for almost all worldwide iron ore demand. However, technological changes in iron ore mining through to the production of finished steel have been major contributors in determining the quantities and properties of the iron ore demanded. There are two technologies used to produce steel: BOFs, which are charged with molten blast furnace iron and ferrous scrap at the integrated steel mills; and EAFs, which are charged with scrap and/or DRI at the mini-mill plants.

According to the World Steel Association, worldwide steel demand is positively impacted by rapid urbanization in emerging countries such as China, India, Brazil and Russia. Based on statistics compiled by the U.S. Geological Survey, 2010 global iron ore production was expected to total 2,400 million t, with China leading the industry as both the world's largest producer and consumer of iron ore. Production from China in 2010 was roughly 900 million t, or approximately 37.5% of the world's production. The Chinese iron ore industry has grown at an annual rate in excess of 20% over the last several years versus the global average (excluding China) of 7%, driven by the country's burgeoning steel industry and rapid industrialization. According to the World Steel Association, in 2011, worldwide steel demand is expected to grow by over 5%.

As the world's largest producer of crude steel, China, with limited domestic supply of iron ore, is also the world's largest importer. According to the U.S. Geological Survey, China produced 880 million t of iron ore in 2009 and, according to Anglo-American, imported another 628 million t to meet its domestic steel manufacturing demand. The next largest importer is the European Union at 154 million t, followed by Japan with 140 million t and South Korea with 50 million t.

There is significant concentration in the global iron ore industry. Vale SA, Rio Tinto plc and BHP Billiton Limited are the world's largest iron ore producing companies with total production representing approximately 24% of total global production.