SIMANDOU25 Feb 2025 07:22
COLUMN – Massive Simandou mine can end Australia's golden iron ore age, or start new one: Russell
06:46
(The views expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Feb 25 (Reuters) – The term gamechanger is often over used enough to be rendered meaningless, but the huge Simandou mine in the West African country of Guinea is going to be just that as its start up is set to rock the seaborne iron ore market.
The first cargoes from the project may arrive by the end of this year and it's expected that it will ramp up to its full capacity of 120 million metric tons per annum fairly quickly.
The four blocks of Simandou are impressive in their scale and infrastructure challenges, boasting a 620 kilometre (384 mile) rail line, a new port with dedicated trans-shipment vessels that will load bulk carriers offshore.
But Simandou is more than a technical marvel, as it will meet around 10% of the annual seaborne imports of China, the world's biggest buyer of the key steel raw material, taking about 75% of global seaborne iron ore.
Simandou is largely a Chinese venture, with 75% of the production controlled by Chinese companies including Baosteel , and 25% held by Rio Tinto , the world's largest iron ore miner.
While in theory Simandou's output could be sold to buyers across the globe, in practice virtually all of it is likely to head to China.
The project will also produce high-grade iron ore, around 65.3% iron content, which is better quality than most of what Rio and its competitors mine in Western Australia, the top iron ore producing region.
High grade iron ore may be in stronger demand in coming years as Chinese steel mills seek to decarbonise, an imperative given that steel production accounts for about 8% of total worldwide carbon emissions.
Simandou's iron ore will be of sufficient quality to be fed directly into electric arc furnaces (EAFs), which produce steel with considerably lower emissions than through the more common process of using basic oxygen furnaces, which require substantial volumes of coal.
The question for the iron ore market is who gets pushed out of China when Simandou's ore starts to arrive?
This of course assumes that China's steel output remains constant at around the 1 billion ton per annum level it has been at since 2019.
There may be some loss of supply from major exporters Australia and Brazil as existing mines reach end of life and aren't replaced, but even allowing for this it's likely that some iron ore will be pushed out of the market.
The obvious candidates will be high-cost and lower-grade iron ores, and it's likely that the producers of such iron ore will lower output over time by allowing mines to reach end of life earlier than planned.
This spells bad news for some of the miners in Western Australia as a combination of a switch to higher-grade iron ore, stagnant demand from China and increased supply from Guine
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