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Mining companies stopped existing projects

19 January 2015

Since the summer period this year, the world's mining companies have suspended or even abolished the 22 iron ore project. The main factor in favor of this decision was the fall in raw material costs to a minimum 5letnego. Stopping projects will reduce or eliminate the excess market supply fully. Experts estimate the total amount of crude iron ore in these projects have reached 140 million. Tons. On the world market given amount of production would have fallen over 5-years. Bloomberg Intelligence representatives have estimated that the annual increase in global demand for iron ore in the amount of 5% by 2018, the market will begin to experience a shortage.

According to Metal Bulletin data provided by the end of December the price of ore with 62% iron content — including postage in the Chinese port of Qingdao Marine — fell by 1.6%. The cost of one ton amounted to 66,84 USD, reaching its lowest level since June 2009. According to Bloomberg Intelligence data to mid-summer, the market experienced an influx of new capacity in razmere100 mln. Tons. This amount has further complicated the development of new projects, despite the low cost of production.

The spot price of iron ore has dropped to a new low for the last 5 years against the backdrop of slowing economic growth in China. Accordingly, the demand for raw materials is poor. Since January 2014 the quotations of iron ore decreased by 50%. This reduction is justified by the increase in supply companies Rio Tinto, Vale and BHP Billiton. Before that Australia, which is considered a leading iron ore exporter, has reduced forecast of the average cost of raw materials by 33% next year.

If in September the price was expected at the level of 94 USD / ton, and now analysts put the number at 63 USD / ton. The average ore costs in the current year will be 88 USD / ton. Representatives of the investment bank Morgan Stanley also lowered forecasts for the next year. In 2015, on their part is expected to reduce raw material costs by 9%, which will be 79 USD / ton. In 2016, the price decline by 14%, reaching 75 USD / ton.

The leading iron ore companies carefully trying to remove from the world market of Chinese Rudar. To this effect a build-up of production at lower cost. In the near future as a result of these measures the dependence on imported Chinese steel volumes will cross the border 90%.

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