UNCTAD Multi-Year Expert Meeting on Commodities and Development 2013 Recent developments and new challenges in commodity markets, and policy options for commodity-based inclusive growth and sustainable development Room XXVI Palais des Nations Geneva, Switzerland Recent developments and outlook in the iron ore market by Virgilio Gaggiato Business Intelligence Manager, Samarco Iron Ore Europe BV The Netherlands 20 MARCH 2013 This material has been reproduced in the language and form as it was provided. The views expressed are those of the author and do not necessarily reflect the views of UNCTAD. Commodities and Development Recent developments and outlook in the iron ore market March 20-21 Virgílio Gaggiato Iron Ore Market 1º Characteristic: Low level of substitution Iron Reduction Mining Scrap Steel Production Final aplication Semi-finished Finished products Source: Samarco Iron Ore Market 2º Characteristic: Dependence on resource location Relevance of the seaborne market Source: Samarco Iron Ore Market – Past developments Iron Ore consumption Crude steel production growth Push on seaborne demand Shift on market center Source: Wood Mac, Samarco Iron Ore Market – Recent developments Iron Ore Prices Iron Ore $/dmt • Steel and iron ore prices • Start of spot prices (India) • Collapse of benchmark system 140 Iron Ore C$/dmtu 120 Price Response 100 80 60 40 20 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Tex Report, Samarco Iron Ore Market 2012 Volatility and Margins Source: SBB, Samarco Iron Ore Market Trends New players over on pricing iron ore Financial Market (derivatives) Trader`s influence on prices Source: Platts, Samarco Iron Ore Market Trends New Supply and changes on ore`s characteristics Prices moving downwards Costs moving upwards Source: CRU, Wood Mac, Samarco Iron Ore Market Trends Conclusion The return of the current cycle? Prices to moderate over medium term New pricing systems Higher volatility Lower grades Iron Ore Market Trends Environmental pressures Higher Production costs Higher project costs