Time to bargain for price below $90/t CFR, says trader
Indian steel mills could possibly make US$100-$150 million investments in two mega mines in Australia in a strategic move to capture a share of the higher-grade magnetite ore to make green steel from 2025-26 onwards, taking advantage of the current geopolitical crisis caused by the Ukraine-Russia war and a slowdown in the main Chinese economic sectors.
Investors in North Asia, with China as the World’s biggest iron ore buyer, are evaluating the risks in the coming years and have expressed hope that Ukraine and Russia will not drag their war for years though they have acknowledged that the near-term peace solution is not expected.
Delegates at the Singapore International Ferrous Week, held 17-20 May 2022 post-Covid, were bullish except for the Ukraine-Russian war that has already impacted global markets.
“This is painfully hurting the economies,” said a diplomatic observer.
Amidst the fast-changing global economic scenarios, a leading Australian mine developer is seeking Indian investments for its US$500 million development of 66%-60%Fe Fines grade ore resources, which traders said was timely for Indian steel sector to invest in return for a fixed price and competitively negotiated supply contract.
It is time to bargain, according to an iron ore trader, who says a price below US$90 per tonne CFR for a one million tonne a year contract would be good for the Indian steel mills, given the softening ore prices due to a slowdown in China and the uncertainties in the global market place.
Lake Giles Iron Project in Western Australia is looking for Indian partnership with an investment of 10-20% for its US$500 million phase I mine development that is already in the process.
Formalising strategic partnerships for the development and infrastructure required to commercialise the Lake Giles Iron Project remains a key focus this year, said Richard Moon, General Manager for International Sales and Marketing at Macarthur Minerals, the developer of Lake Giles.
“The company is in active discussions with a number of global corporates that have the potential to add capital and technical capabilities to the project,” said Moon, adding the possibilities of the Indian steel sector participation.
Moon expects 10% to 20% Indian investment in the US$500 million Lake Giles development which is expected to produce three to four million tonnes/year of higher-grade ore, out of which one to two million tonnes could be supplied to India.
Lake Giles is expected to commence iron ore production from 2026.
“We are planning to use a lot of renewable energy in our project while India is expected to use hydrogen among other sources of energy to make green steel,” Moon told Press Trust of India on 17 May 2022 at the opening of Singapore conference.
Separately, South Australia’s Razorback project, with resource of 68.5 per cent Fe Fines magnetite content, is also evaluating investors for its US$500 million Phase I development.
Razorback is under various phases of studies including feasibility while a final investment decision is expected soon. It is expected to commence production of about 2.5-3 million tonnes/year in 2025.
“We are embarking on early stages of financing of our project and are looking for strategic partners in Australia’s high-grade magnetite resources,” said Stephen Weir, CEO of Magnetite Mines Ltd, which owns the project with a resource of 4.2 billion tonnes from two very large magnetite iron ore deposits.
The Direct Reduction Iron (DRI) process and the use of energy such as hydrogen can turn magnetite grade ore into green steel, according to Weir, who noted India’s long-term plans to reduce carbon emission and produce green steel.
Traders see Indian mills having a good chance of negotiating a supply contract based on a benchmark, supported by a US$50 million investment for 10% stake in the first phase of Razorback which though is focus on North Asia both for investment and supply contracts.
Indian mills are set to scale production from 118 million tonnes of crude steel in 2021 to 300 million tonnes in 2030-31 when domestic consumption would be 200 million tonnes.
India’s highest ore grade is 64% FE Fines, and the mills need higher grades such as 66-69% FE Fines to upgrade to producing green steel and cut carbon emissions.
The Razorback Iron Ore Project is a magnetite iron ore deposit capable of producing a high-grade iron ore concentrate product for use in steel production. The Project is 100% owned and operated by the ASX listed Magnetite Mines Limited (ASX: MGT). fiinews.com
