Recent Trends in the Iron Ore Market

Since 2001, Chinese firms have invested approximately US$12 billion into iron ore projects and signed approximately US$82 billion worth of off-take agreements. As demonstrated by the chart above, China's Seaborne demand for iron ore is expected to remain strong for the years to come with demand expected to grow at a rate of 8% per year between 2009 and 2015. Demand from Korea is slightly behind China, and is expected to grow at a rate of 6% from 2009 to 2015.

Another recent development is the sharp increase in capital cost intensity involved in iron ore production. According to Macquarie Research, the average cost for bringing production capacity online has more than doubled in the past five years. This trend has also affected mature operations of companies such as Rio Tinto plc and BHP Billiton Limited who are spending significant new amounts of capital to maintain existing levels of export volumes.