Today, it is estimated that the global steel industry uses about 2 billion tonnes of iron ore, 1 billion tonnes of metallurgical coal and 550 million tonnes of recycled steel to produce 1.6 billion tonnes of crude steel annually.
Steelmaking materials are some of the biggest commodities in the world in terms of volume of production, consumption and transportation. For example, iron ore, with a production volume of around 2 billion tonnes and an export volume of about 1.5 billion tonnes, is the third largest commodity in terms of production volume - after crude oil and coal - and the second most traded commodity– after crude oil - globally. Ferrous scrap, with a global recycling volume of more than 600 Mt, is the largest commodity recycling activity in the world.
World iron ore exports, 2001 – 2016, in million tonnes (Mt)
Source: UN COMTRADE
|World iron ore exports (Mt)||476||755||1 130||1 544|
World exports of iron ore, coal and crude oil in 2015, in million tonnes (Mt)
Source: UN COMTRADE (iron ore); IEA (coal) and IEA (crude oil, including Natural Gas Liquids)
|Iron ore||Coal||Crude oil|
|World exports, 2015 (Mt)||1 447||1 308||2 216|
The unprecedented growth of China’s steel production in the 2000s resulted in very strong growth in global demand for steelmaking materials. Global iron ore exports grew from half a billion tonnes in 2000 to 1.5 billion tonnes in 2016, while global metallurgical coal exports grew from roughly 180 Mt to about 310 Mt. Thus, Australia consolidated its position as the main supplier of steelmaking materials with iron ore exports growing from about 150 Mt to 800 Mt and its metallurgical coal exports growing from around 100 Mt to 200 Mt. The future for Australia suggests further growth but at a much slower pace.
This strong growth in demand for steelmaking raw materials resulted in a decline in the quality of the materials and led to a, still continuing, tightness in the market segments for higher quality materials. This has put pressure on the efficiency and the environmental performance of the global steel industry’s raw materials processing operations. However, the development of new technology and techniques has enabled the global steel industry to meet ever more stringent environmental standards.
Adverse weather conditions and accidents can add to the volatility in raw materials supply. For example, it is estimated that cyclone Debbie resulted in about 10 Mt drop in Australian supply of metallurgical coal this year, and this had a clear impact on premium hard coking coal markets in 2017 as Australia is the main supplier for this segment.
Recently, we have also seen the continuing supply side reforms and environmental protection measures in China having a big impact on steelmaking raw materials markets. For example, the closure of outdated induction furnace capacity in China has led to an unexpected increase in the country’s crude steel production through the BF-BOF route this year and hence in its demand for iron and metallurgical coal.
We expect increased demand for raw materials in India to meet forecasted steel demand growth over the next decades. The country has abundant iron ore reserves but very limited metallurgical coal reserves, which are mostly of insufficient quality. Hence, the country is expected to become the largest metallurgical coal importing country by 2020, taking over Japan’s leading position.