The report on the iron ore sector describes the current market, outlines developments within the sector and focuses on factors influencing the success of the local industry. The report also profiles six companies, including Kumba Iron Ore which in July 2015 announced the decision to close its Thabazimbi mine after a review of its operations. Other players profiled include Assmang, Palabora Copper and the vertically integrated steel and vanadium producer Evraz Highveld Steel and Vanadium which initiated voluntary business rescue proceedings in April 2015 and in July 2015 announced a temporary halt to its mining and steelmaking operations.
The Mining of Iron Ore in South Africa
This report focuses on the South African iron ore mining sector which produced 78 million tonnes (Mt) of iron ore during 2014. Of this total, 67.2Mt worth US$6.7bn was exported. China remains the largest importer of South African iron ore, importing 73% of all local iron ore exports in 2014, valued at US$4.91bn. The latest statistics from the Department of Mineral Resources (DMR) indicate that more than 21,000 people were employed by the iron ore mining sector at 12 iron ore mines in 2013.
Challenges faced by this sector include unreliable and reduced electricity supply and rapidly escalating production costs. Added to these is the drastic decrease in iron ore prices as a result of large supplies of low-cost iron ore from Australia and Brazil. The recent drop in iron ore prices to less than US$40 per ton means that local companies, already struggling to survive, will have to implement more effective strategies in an attempt to mine the iron ore at a lower break-even price. To add to its difficulties, the country’s largest producer, Anglo-American’s Kumba Iron Ore was informed by its most important local customer ArcelorMittal South Africa that it wants to re-open iron ore pricing negotiations.