BHP banks on steel growth in India, SE Asia for iron ore demand

Miner BHP Billiton is sticking with its mantra of further growth to projected peak steel demand next decade, and focus on additional steel raw materials demand centred in Asia, it said Wednesday.

BHP, which is preparing to develop the new 80 million mt/year South Flank iron ore mine, expects new blast furnaces at steel mills in India, Vietnam, Malaysia and Indonesia to boost demand for the commodity.

Chinese steel demand may be spurred by the Silk Road-based land and maritime networks as the industry cycle turns to steel and metals demand in the building blocks for renewables projects, and less polluting high grade commodities.

BHP expects “emerging Asia to drive long-term steel demand,” according to a presentation prepared by BHP’s Western Australia Iron Ore president Edgar Basto Wednesday. He presented to Informa’s Annual Global Iron Ore & Steel Forecast Conference in Perth.

Emerging Asia, including India and Southeast Asian countries, may account for 1.7% compound annual growth in steel demand between 2016 and 2026, with China’s demand already closer to peaking, it said. As China turns more to ferrous scrap for steelmaking, new blast furnaces demanding coke and iron ore may help compensate after BHP shipped over 1 billion mt of iron ore to China and Japan.

In Switzerland, BHP CEO Andrew Mackenzie said Tuesday that additional steel demand of 150 million mt may be generated by China’s Belt and Road initiative over the next decade.

Speaking at the FT Commodities Global Summit in Lausanne, he highlighted the company’s planning around meeting demand from population growth, renewables and electrification.

“As steel mills and copper smelters transition to more energy efficient and less carbon intensive technology, structural premiums will emerge for higher quality iron ore, metallurgical coal and copper concentrates,” Mackenzie said in prepared remarks released by BHP.

BHP is the world’s third-largest iron ore producer, and with leaders Vale and Rio Tinto, the three companies are benefiting from low mining and logistics costs and portfolios with medium and higher grade iron ore fines and lump.

BHP said high grade iron ore, grading at more than 65% Fe, remains in high demand. Growth in low grade iron ore supply has tracked deteriorating relative price spreads for 58% Fe ores.

South Flank is expected to help BHP’s average iron ore product improve to a 62% Fe grade, from 61% Fe currently, and increase the proportion of lump ore supplied.

If South Flank is approved, the volumes will aid increasing overall group Western Australia iron ore quality, while the Mining Area C complex in the Pilbara will become the world’s largest stand-alone iron ore mining and processing center, Basto said.

BHP is still guiding board approval submission for the project in mid-2018 as it undertakes a feasibility study.

BHP said it is on track to reach a 290 million mt/year run rate capacity at Port Hedland by the end of June 2019, in the Australian company’s next financial year.

The miner expects Australian iron ore production of 275 million-280 million mt in the year through June 30, 2018, on a 100% basis, with growth cited from Jimblebar and MAC complexes.

Source: PLATTS