Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
At Rio Tinto’s investor conference in Sydney last week Sam Walsh, respected chief of iron ore at the world’s number two producer of the commodity, showed two slides that neatly sum up supply and demand in the iron ore market.
Demand for ore from China – the main driver for the market – will continue its steep climb for the rest of this decade and into the next before peaking around 2030:
While consumption will stay robust over the next several decades, supply continues to lag behind as competition for labour, energy and project financing increase, approval processes lengthen further and costs in remote areas continue to escalate.
The graph below shows just how wide the gulf is between plans and execution:
Walsh says this shortfall will be made up by Chinese domestic supply in the short and medium term.
And mining iron in that part of the world certainly isn’t without its challenges.
3 Comments
JJ Butler
Two opposing observations:
1) Chinese iron ore may be near peak consumption right now, as iron ore is the first bulk material to go into decline as the industrialization process matures.
2) When Chinese iron ore consumption does peak, other emerging markets may be ready to carry the torch.
HKLiao
because of the greed from suppliers and buyers, the Chinese peak itself earlier than they need. the golden days are over and not until 2030 as predicted by Rio. and I do believe from now to 2030, there may be surge of iron ore demands due to development in more rural area (like western China infrastructure) but I do not see its peak like in the 2000-2010s era!!
Karan
I agree with the prediction but this is going to be Africa’s opportunity this time and specially west Africa will take the lions share. Karan