Large Southwest multi-minerals can end Australia’s gold and iron ore era, or start a new one: Russell

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Launceston, Australia, February 25 (Reuters) – The word gamechanger is usually too used to make no sense, but the huge simandou mine in the Guinea country in West Africa will be, as its launch will rock, offshore iron ore market.

The first shipments of the project may arrive before the end of the year and it is expected to raise it in full to its full capacity of 120 million tons soon.

The four blocks of Simandou are impressive in terms of its size and infrastructure challenges, with a 620km (384 miles) rail line, a new port with dedicated cross-professional ships that can be loaded on the sea. Carrier.

But Simandou is more than a technological miracle, as it will reach 10% of China’s annual marine imports, the largest buyer of the world’s largest steel raw materials, accounting for 75% of global marine iron ore.

Simandou is largely a Chinese risk, with 75% controlled by Chinese companies including Baosteel and 25% held by Rio Tinto, the world’s largest iron ore miner.

In theory, Simandou’s output could be sold to buyers around the world, but in reality, almost all of these products could be headed to China.

The project will also produce high iron ore with an iron content of about 65.3%, which is better than most competitors in Western Australia (the highest iron ore production area).

As Chinese steel mills seek to decarbonize, demand for high-grade iron ore may increase, given that steel production accounts for about 8% of global total carbon emissions.

Simandou’s iron ore will have sufficient mass to be fed directly into an electric arc furnace (EAFS), while through the more common process of using alkaline oxygen furnaces, their emissions are much lower, which requires a lot of coal.

The question for the iron ore market is, who was kicked out of China when Simondu’s ore started to arrive?

Of course, this assumes that China’s steel production remains constant, and has been at 1 billion tons per year since 2019.

Major Australian and Brazilian exporters may lose some supply as existing mines reach the end of their lives, but even if they are allowed to do so, some iron ore may be pushed out of the market.

The obvious candidates will be high-cost and low-grade iron ore, producers of such iron ore may reduce production by allowing mines to be prematurely older than planned life.

This is bad news for some miners in Western Australia, and a combination of stagnant demand in China and an increased supply in Guinea may put pressure on prices to decline.

Australia’s miners and government have enjoyed strong operations in iron ore for most of the past decade, gaining the benefits of building huge, efficient mines and logistics solutions.

Even at around $108 per ton, the cost of iron ore is still high, given the cost of producing a large amount and bringing it to ports in Western Australia is about $23.

With Simandou’s new high-grade iron ore coming and decarbonization needs, it can be said that Australia’s golden era of iron ore is coming to an end.

But this could also launch a new investment frenzy for Australia to increase the value of its iron ore bounty.

If it is assumed that the world’s manufacturers will increasingly turn to green steel, Australia may be better than any other country.

To make green steel, you need low-cost iron ore and a lot of cheap renewable energy.

Australia already has low-cost iron ore and is able to build enough renewable energy, mainly by supporting solar energy through battery storage.

Renewable energy is used to make green hydrogen, which in turn converts iron ore into direct reduction iron (DRI) or hot black iron (HBI).

DRI can be used to make steel in EAF, while HBI can be shipped to Asia to make steel using EAFS.

However, the federal and state governments may support any plans to make momentum with domestic charitable ore.

A positive signal is that the federal government recently announced a $2.4 billion ($1.5 billion) package to support steel production in Whyalla, South Australia.

The funding includes a $1 billion Green Iron Investment Fund to support new projects and upgrade Whyalla’s existing steel plant.

This is a start, but if Australia’s iron ore success story will write another chapter, more things have to be done.

The views expressed here are the author’s views and are a columnist for Reuters. (Edited by Himani Sarkar)