Record production of iron ore in 2011 points to recovery after recession – UN report

The global production of iron ore achieved an all-time high last year, confirming signs of a recovery of the steel industry after the 2009 recession, according to a new United Nations report.

Published by the UN Conference on Trade and Development (UNCTAD) in cooperation with the Sweden-based Raw Materials Group, the Iron Ore Market 2011-2013 report states that the amount of iron ore produced globally in 2011 was 1.92 billion tons, representing a 4.7 per cent increase from 2010.

Among the major producers of this mineral, which is vital for steel production, are Brazil, China and Australia, according to the report, adding that while production increased in most regions, it declined in Europe and India.

Developing countries, the report notes, accounted for almost half of the total exports of the iron ore, making it the tenth year in a row of increased exports.

The increase in crude steel production points to a recovery since the financial crisis in 2009, and the report attributes this growth mainly to China, where production started increasing in November 2008.

“China’s imports of iron ore increased by 11 per cent in 2011 compared with 2010, or to 686.7 million tons, and the country accounted for 60.1 per cent of total world imports,” the report states. “Steel production elsewhere in the world was also growing though it had still not reached its pre-crisis production levels by the end of 2011.”

However, the report warns that uncertainty over prices and a decrease of corporate concentration signal difficult conditions for upcoming years. Since almost all iron ore producers and steel mills have abandoned the benchmark pricing system, there is widespread confusion about prices, and the report predicts that price volatility will increase with various pricing practices in place.

In addition, the report notes that corporate concentration in the iron ore industry decreased, with new production companies emerging in many countries, as well as small and mid-sized producers, which will require a period of adjustment for market shares.

Iron Ore Market 2011-2013 also estimates that iron ore use will increase from 1.92 billion tons in 2011 to about two billion tons in 2012 and 2.08 billion tons in 2013. While an increase in demand will mean higher prices, the report predicts that prices will decline from 2013 onwards as supply gradually adapts to growing demand.