Brazil Plans Huge Increase In Iron Ore Production

The Brazilian iron ore industry has unveiled a $US27 billion plan to nearly double production.

Paulo Camillo Penna, president of the Brazilian mining institute Ibram, said the investment would increase the nation's annual iron ore output from 350 million to 650 million tonnes from over the next four years. That compares with Australian iron ore output of about 290 million tonnes this financial year and projected production of 489 million tonnes in 2012-13.

Rio de Janiero-based Vale, the world's biggest iron ore producer, is expected to account for about 450 million tonnes of Brazil's forecast iron ore production in 2012.

The news marks an escalation in the already fierce rivalry between Australian and Brazilian iron ore producers, as both parties compete for a bigger share of the all-important Chinese market. China has driven six consecutive years of growth in global iron ore demand, thanks to rising steel production fuelled by the rapid urbanisation of its 1.3 billion citizens. It is expected to account for 60 per cent of growth in global steel consumption over the next five years, as it balloons to 1.8 billion tonnes annually by 2013.

Vale has already negotiated a 65 per cent to 71 per cent price increase with its Asian and European customers in this year's iron ore contract price negotiations while Australian firms BHP Billiton and Rio Tinto are still locked in discussions with Chinese steel mills for iron ore contract prices to reflect the cheaper cost of shipping the raw material to China from Australia. It costs a Chinese steel mill just under $US100 to import a tonne of iron ore from Brazil at existing shipping rates, compared with about $US37.50 from Australia. Analysts expect BHP and Rio to secure a partial freight premium for Australian iron ore this year, with most speculation in the range of $US10 to $US15 a tonne.

Iron ore is already Australia's biggest commodity export, bringing in more than $A20 billion this financial year.

Source: Courier Mail
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