Chapter 10: Iron ore & steel

Iron is the most widespread of all metals, in terms of production, consumption and trade. It is used almost invariably in the form of steel, which is present in almost every aspect of our everyday life. The buildings we live and work in; the cars we drive; the electrical appliances we use; the drills to extract oil; the machines we construct to manufacture new goods – all are made of, or contain, steel because of its strength and flexibility. As Fish (1995) puts it:

“Steel is a material essential for the modern world. The industrial revolution would not have been possible without the development of iron and steel.”

Iron, however, is not a new metal; its use has been widespread for several thousand years.[1] It was the development of technology that could produce it cheaply and in large quantities, which made it indispensable for the industrial revolution.

Physical characteristics

Chemically, iron is an active metal. It combines with fluorine, chlorine, bromine, iodine, sulphur, phosphorus, carbon and silicon. It burns in oxygen to form ferrosoferic oxide – Fe3O4. When exposed to moist air, iron becomes corroded, forming a reddish-brown, flaky, hydrated ferric oxide, commonly known as rust.

Iron is the third most abundant element, and second most abundant metal, estimated to make up ca. 5% of the earth’s crust. It is very rare for metallic iron to appear in free form; instead, it is most frequently found in chemical compounds, i.e. ores. In general, grades of iron ore around the world range from 30% to over 70% Fe. The principal ferrous ores are:

• hematite (Fe₂O₃), which is the most common and, in its pure form, contains 70% iron;

• magnetite (Fe₃O₄), which when pure contains ~72% iron;

• limonite (FeO(OH)·nH₂O), a hydrated iron oxide with ~55-60%;

• ilmenite (FeTiO₃), a titanium oxide with ~53% TiO2 and ~37% Fe;

• siderite (FeCO₃), containing ~48% iron;

• pyrite (FeS₂), containing ~47% iron; and

• taconite, containing ~25-35% iron

The first four oxides are the most widely used iron ores. Pyrite – an iron sulphide – is the least common because of the difficulty in extracting the metal from the compound. Taconite is the ore with the most impurities, and has to be beneficiated and agglomerated before it can be used; some North American ores are taconites and this is where pelletisation has been heavily used. Beneficiation and agglomeration are going to be discussed in the following section.

Sometimes, iron ore deposits also contain valuable minerals of copper, titanium, phosphorus, vanadium, cobalt and, occasionally, even gold and silver. In the past, gold has been recovered from iron ore operations in Minas Gerais in Brazil; copper, cobalt, minor accounts of nickel, and unspecified amounts of gold and silver occur in the ore at Hierro, Peru.[3] Therefore, it is common for the ores to be processed before they leave their origin in order to recover any of the above metals.

Supply determinants

Iron is a metal which can be found in almost every country around the world. The problem is that it may be found in quantities which are too small, or formations which are too impure, to exploit. In North America, taconite formations are found in the Mesabi range in the Lake Superior region. Most North American iron formations contain 30% or more total iron, 60-80% of which is economically recoverable.

Better quality iron formations are found in South America, especially Brazil. Brazilian itabirites are usually richer in iron content; the term was applied originally in Itabira, Brazil, to a high-grade massive specular hematite ore (66% Fe), and is now used to describe formations in which ore is present in thin layers of hematite, magnetite, or martite. Iron ore may also be present in riverbed deposits, such as the Robe River deposit in Australia; or in manganiferous or titaniferous compounds, like the ores found in Canada, India and New Zealand.

Before we look at individual countries, however, we need to discuss in more detail the production characteristics and initial processing of iron ore.

Iron ore processing

As we have seen, iron is abundant and can be found in a variety of compounds. However, not all ores can be used directly for the iron-making process. Plain, unconcentrated iron ore as it leaves the mine, is classified as crude ore. If this ore can be used with minimal crushing and screening, it is considered as direct-shipping ore. This is also frequently known as lump ore and refers to any relatively unbeneficiated product, with granules generally sized between 6 and 30 mm.

Usually, however, most ores need to be beneficiated, i.e. processed until a considerable part of the gangue[4] has been removed and their iron content improves. Hematite and magnetite are concentrated by means of magnetic separators. Other ores, however, are concentrated by screening or flotation. In all cases, the products of the beneficiation process are called concentrates.

After beneficiation, the ore has the proper iron content, but may not be suitable yet for use in the blast furnace, because the size of the ore particles is too small.[5] At this stage, iron ore is usually known as fines, a term which refers mainly to the size of the ore granules, and is very important because it affects the usability of the ore in the blast furnace.

Most iron ores with a particle diameter of less than ¼-inch must be agglomerated. Agglomeration is a process in which small particles are combined to produce larger, permanent masses. There are two principal types of agglomerates – sinter and pellets - see Exhibits 1 and 2 for examples.

Sinter is produced by firing a mixture of fine ore, lime or limestone, and coke on a moving horizontal grate. The result is a rather brittle product, suitable for blast furnace feed, but sensitive to handling and transportation; this is the reason why almost all sintering facilities are located next to steel mills.

Pellets are the product of a process whereby very fine iron ore (pellet feed) is rolled into ‘green’[6] pellets, using bentonite[7] as a binder, and then fired at 1,250-1,350°C in a furnace to produce the final indurated product.

Pellets are normally between 9-16 mm, with less than 5% below 5 mm; have excellent burning characteristics and, hence, are ideal for blast furnace feed; and are also resistant to handling and transportation, which is why pelletizing plants are usually located near mines. Pelletizing normally yields products of at least 60% Fe content, with the average being 65% Fe. The process was originally used in the United States and Canada as a means of recovering more iron from the low-grade taconite ores that were available domestically.

In North America, the United States and Canada have traditionally been important producers of iron ore, but their entire output is consumed domestically, or channelled in intra-regional trade. South America rose to prominence after the 1950s, especially Brazil which competes directly with Australia in the export markets. China remains the world’s third largest producer, but none of its production finds its way in the international market. On the contrary, because of the astounding domestic absorption, the country is in fact the world’s largest importer. 

Western Europe

Today, Sweden is the only important West European producer. Sweden’s deposits are estimated in the range of 1.3 billion tonnes (with an iron content of 0.6 billion tonnes) and are produced mainly in the northern part of the country.  Some of these deposits are located above the Arctic Circle and contain some of the world’s most important high-grade iron ore; the ore bodies of the Kiruna district – Kirunavaara, Luossavaara, Malmberget, and Svappavaara – account for over 90% of Swedish exports. The rest of Swedish production originates in the Grangesberg area in central Sweden, with the principal mines about 150 km west of Stockholm.

The country’s iron ore production and exports are dominated by Luossavaara-Kirunavaara AB (LKAB), a state-owned mining company, which was established in 1890. The company ships a number of ore grades with %Fe-content ranging from 61.8% for KDF’s (Kiruna D Fines – high phosphoric), to 70.6% for MAF’s (Malmberget A fines – low phosphoric). One important characteristic of Swedish mines is the fact that they are underground, as opposed to the open-pit mines in countries like Brazil and Australia, which are less costly to operate and, thus, more competitive in pricing their products.

North America

Most of the available iron ore reserves in North America are located in Canada. Crude ore reserves are estimated in the region of 2.9 billion tonnes for USA and 6 billion tonnes for Canada, with Fe content of 0.76 and 2.3 billion tonnes respectively. Most resources are primarily low-grade, taconite-type ores, of the Lake Superior district, that have to be processed in order to be suitable for commercial purposes.

There are several mining companies producing iron ore in the United States and Canada. In the United States, Cliffs Natural Resources (formerly Cleveland Cliffs) is the most dominant. They produce a number of iron ore products, with sinter and pellets being the most common. In Canada, production is dominated by the Iron Ore Company of Canada (IOC).[8] The other producer is ArcelorMittal Mining Canada (formerly Quebec Cartier Mining - QCM)[9].

Production in the United States and Canada should be examined as one, since all of the iron ore output is used in the regional steel industry, especially in steel mills in the United States.

South America

Brazil rose to prominence by becoming Japan’s and West Europe’s most important supplier. In the 2000s, China attracted most of the Brazilian exports and still does so. Brazilian resources are estimated in the region of 32 billion tonnes (with an estimated 17 billion tonnes of iron content), and are located primarily in two states – Minas Gerais (in the southern, more developed part of the country), and Para (in the northern, more remote and less developed Amazon region). In the south, the deposits are found mainly in the ‘Quadrilatero Ferrifero’[10], while in the north they are found near the municipality of Maraba in the Carajás range. The mines in the Quadrilatero Ferrifero have provided most of Brazil’s production and exports, while production from the Carajás project started only in the mid-1980s. However, the Carajás resources are of magnificent abundance and quality; some 20 Bmt are estimated to be in place; their grade is in the region of 66% Fe; and the project is designed to yield some 35 Mmt per annum, at full capacity.

Brazilian iron ore production is dominated by a massive state-owned company, with considerable interests in other metal and non-metal commodities: Vale, which started life as Companhía Vale do Rio Doce (CVRD). Vale produces about 80% of the country’s iron ore, with grades ranging from 61-67% Fe. Samarco, a joint venture between BHP Billiton and Vale, is the only other sizeable iron producer in the country. Several other smaller companies were primarily joint venture between Vale and steel companies from Germany, Japan, Italy and Spain. Most of these companies have been absorbed into Vale and exist as long-term partners in pelletizing plants.

Other Latin American producers include Venezuela, Chile, and Peru. Of these, Venezuela is the most important, with reserves estimated at 4 billion tonnes of crude ore, and production about 15-20 million tonnes per year. The entire production is handled by the state-owned CVG Ferrominera Orinoco, which operates four principal mines at Cerro Bolívar, El Pao, San Isidro, and Los Barrancos. With the exception of El Pao, all other mines are in the ‘Bolívar Iron Quadrilateral’, which is located in the valley of River Orinoco and its tributary Caroni.

Oceania

After China, the most important producer of iron ore in the Pacific Rim is Australia. Production was at an all-time high of 938 million tons in 2023, most of which is exported, with iron ore reserves estimated at about 60 billion tons crude ore. Most of the Australian output is exported to other Pacific Rim countries, particularly China, Japan, South Korea, and Taiwan. About half of Australia’s iron ore comes in the form of lumps, while the remaining is usually pelletized at destination, although there is a small pelletizing capacity in place. As Bolis, J.L.Bekkala, J.A. (1987) note:

“Australia is one of the lowest cost producers of iron ore in the world, making its operations very competitive on the world market. This is attributable to several factors – large, high-grade deposits; high production; highly automated nature of the industry in both mining and shipping; and short distances from [Chinese and] Japanese markets.”

Most Australian deposits are located in Pilbara, Western Australia, with a few mines in the state of South Australia and the island of Tasmania. A handful of mining companies control the iron ore industry in Australia, and are also involved in the mining of most other metallic ores. The largest of these companies is BHP Billiton, which operates its own mines and also participates in joint ventures with other producers.

Hamersley Iron used to be the other major iron ore producer, and almost as influential as BHP in Australia’s economy and politics. The company is wholly owned by Rio Tinto, which started life after the merger of two British companies with interests in Australian mining. Nowadays the name Hamersley Iron survives only in older annual reports and the mines are managed by Pilbara Iron, a wholly owned subsidiary or Rio Tinto. The company’s mines are also located in the Pilbara region and include Yandicoogina, Hope Downs, Mt. Tom Price, West Angelas, Greater Paraburdoo, Mt. Brockman and Marandoo. Savage River Mines is one of the few projects not located in Western Australia. It is majority-owned by Grance Resources, with a minority stake by UK’s Stemcor and the mine is located in Tasmania.

Asia

Asian output is dominated by two main producers – China and India. The latter was traditionally a considerable iron ore exporter, especially to the Pacific market. Since the 2000s exports declined, as India’s own requirements for domestic steel production increased and the government imposed an export tax on the commodity.

India has been producing about 250 million tons of crude ore per annum, which come from a number of private and state-owned companies. The National Mineral Development Corporation (NMDC) has mines in Bailadila (470 km from the port of Visakhapatnam), and in Donimalai (in the Bellary-Hospet region, 500 km from Madras). NMDC’s entire production is handled by the state-owned Minerals & Metals Trading Corporation of India (MMTC), and it is sold to the Asia Pacific market, mainly China and Japan.

Apart from MMTC, there is a number of private companies that produce – and trade in – iron ore. There are two other important production zones in India  – Kudremukh and Goa. The first is operated by KIOCL; while in the second there are several mines (in Sanquelim, Sonsbi, Orasso Dongor, Rivona, Guelliem and Codli), which are run by Sesa Sterlite, a subsidiary of the privately-owned Vedanta Resources. Other prominent iron ore producers/traders include Dempo, Salgaocar, Chowgule, and several smaller companies.

China produced its highest output of 380 million tonnes of crude ore in 2022, and is also the world’s largest importer, with further quantities coming from Australia, Brazil, South Africa, India, and Peru. Traditionally, the country’s imports were handled by the state-owned China National Metallurgical Import & Export Corporation (CNMIEC), but its role diminished, with the major steel plants of the country, instead, becoming more active in procuring their own needs in iron ore. The major Chinese steel producers – Baowu, HBIS, Shagang and Ansteel – are already large importers and often seek to secure long-term imports by participating in mining investments around the world.

Africa

The most significant iron ore producers on this continent are located in the west and south of Africa. Traditionally, Liberia was the most important iron ore producer in Western Africa, but civil unrest hit production after 1988. As a result, Mauritania has now emerged as the second most important African producer, after South Africa.

Liberian production was mined at the Nimba mountains and exported through the port of Buchanan. The concession was given in 1953 to the Liberian-American-Swedish Company (LAMCO). Operations were ceased in 1989 and the concession was surrendered because of the civil war. Since 2003, when the former president Charles Taylor lost power and the new transitional government came to power, attempts were made to attract new investors to the Nimba project. In August 2005, Mittal Steel (ArcelorMittal) won the concession for 25 years.

In Mauritania, production is in the region of 10 million tonnes per annum, and is controlled by SNIM SEM (Société Nationale Industrielle et Minière), a joint venture between the state, Kuwait Real Estate Investment Consortium, Arab Mining, Iraq Fund for External Development, BRPM-Morocco, and the Islamic Development Bank. The company exports its production through the port of Nouadhibou.

The Republic of South Africa is the top iron ore producer in Africa, with about 80 million tonnes produced in 2018. Most of the production comes from the Sishen mine, which is located in the heart of the country, north of the Orange River. Production was handled by Iscor, the originally state-owned (but later privatised) company, which also operated the electric railway that transports the iron ore from the mine, over a distance of 860 km, to Africa’s deepest port – Saldhana Bay. From 2002, Mittal Steel started acquiring minority interests in Iscor, until 2004 the company came under the complete control of the group and became Mittal Steel South Africa. Saldhana Bay is also used for exports from the Khumani and Beeshoek mines, which is located some 930 km inland and operated by the Associated Manganese Mines of South Africa (Assmang).

A few other African countries also produce iron ore, but in quantities which are rather insignificant for the international market, although their production is important for their domestic needs. These countries are Algeria, Tunisia, Zimbabwe, Nigeria, Morocco, Egypt; and deposits are also present in Gabon, Ghana, Cameroon and the Côte d’Ivoire.

Eastern Europe

Although production has been falling since the late 1980s, CIS production is in the region of 200 Mmt per year, which nowadays accounts for about 8% of world production. Russian and other CIS ores are mostly low-grade, with %Fe contents ranging from 20-50%. All ores undergo beneficiation and have to be agglomerated to sinter or pellets. This is the reason why the CIS has considerable pelletizing capacity.

Kazakhstan has five mines, three of which have annual capacities of over 10 Mmt. These are: Kotomukshky; the Lisakovsky; and Sokolovsko-Sarbaisky. Finally, Azerbaijan has the much smaller Severo-Zapadny mine, which produces just about 2 million tonnes per year. As in the case of Russia, Ukrainian, Kazakh and Azeri ores have an average 30% Fe content, which needs considerable beneficiation and agglomeration.

Steel manufacturing

Iron ore is almost exclusively used in the production of steel. There are, however, a few chemical compounds of iron that have a variety of other minority uses. Ferrous sulphate (FeSO₄), called ‘green vitriol’, is used as a mordant in dyeing, as a tonic medicine and in the manufacture of ink and pigments. Ferric oxide, an amorphous red powder, is used as a pigment, known as either iron red or Venetian red; as a polishing abrasive, known as rouge; and as the magnetisable medium on magnetic tapes and disks. Ferric ferrocyanide (Fe₄[Fe(CN)₆]₃) is a dark-blue amorphous solid, called Prussian blue; it is used as a pigment in paint and in laundry bluing to correct the yellowish tint left by the ferrous salts of water. Finally, potassium ferricyanide (K₃Fe(CN)₆), called red prussiate or potash, is used in processing blueprint paper.

Despite all these ‘exotic’ uses of iron, however, steel production remains the main force that drives the iron ore industry. Steel, in its simplest forms, is the most basic good needed for the industrialisation process of any economy. In fact, crude steel production is often a signal of a buoyant manufacturing sector. The steel sector, of course, is not defined just by crude steel. Advanced steel products and steel alloys are goods of high added value, in which many industrial countries specialise, leaving the bulk of the production of ‘plain’, unalloyed steels to developing countries, with low labour costs.

Demand for steel products is derived from a variety of industries and it is, therefore, segmented. The biggest consumers of steel products are: transportation; construction; machinery; cans and containers; appliances and equipment; mineral exploration industries; and any other sector that is not covered above.

The analysis of demand determinants for crude steel and steel products falls within the framework of the analysis of demand for metals, as was discussed in chapter 8; there is, therefore, no need for further discussion. We are, however, going to focus our attention on the production process of iron and steel products, in order to gain an understanding of the areas where steel is most commonly used.

Ironmaking

The first step in processing the beneficiated – and, possibly, agglomerated – ore is its reduction to iron. There are two main processes for doing so: blast furnace reduction; and direct reduction. Blast furnace reduction is the most widespread method, so we are going to discuss it first.

Blast Furnace

The blast furnace is a ‘tower’, specially built to withstand high temperatures, into which sinter or pellets, coke and limestone are fed from the top. Coke is nothing more that coal which has been ‘carbonised’ in ovens, in order to improve its burning properties.

As these products fall in the tower they encounter the rising hot reducing gases and eventually settle on previous loads fed from the top. To keep the process going, hot air[11] is blasted through special nozzles – tuyères – so that the temperature of the coke remains at about 2,000°C. The iron in the iron ore, sinter, or pellets is melted out to form a pool of molten metal – known as pig iron – in the bottom – or hearth – of the furnace. As iron accumulates in the hearth, it is removed periodically from the furnace – an operation called tapping. The limestone combines with impurities and molten gangue from the ore, forming a liquid slag which, being lighter that the metal, floats on top of it, and is also removed periodically. The charging system at the top of the furnace also acts as a valve mechanism to prevent the escape of gas, which is taken off through large-bore pipes to a gas cleaning plant.

Direct Reduced Iron

An alternative reduction process was developed by Midrex and HYL, whereby iron ore is mixed with coke or natural gas, and heated to about 900°C, in order to increase its iron content, normally to over 80%. The result of the process is not pig iron, but a product known as sponge iron, which can be fed directly to an electric arc furnace (EAF) to produce steel. Sponge iron – or direct reduced iron (DRI) – is more desirable than scrap in EAF steelmaking, because it has a lower level of metallic residuals and other impurities, than recycled scrap.

The main drawback of this method is its high requirement for fuel. As a result, DRI plants are primarily located in energy-rich countries, like Venezuela, Mexico, Iran, Saudi Arabia, India and Indonesia.

• the direct input of iron ore, without need for sintering or agglomeration;

• the substitution of coal for coke;

• lower capital and operating costs; and

• production on a smaller, and ecologically more sound basis.

The Saldhana plant of Mittal Steel South Africa uses the Corex/Midrex method into a continuous chain, producing some 1.2 million tonnes of hot roll steel coil (HRC) per annum. The gist of the Corex process is that it uses coal instead of (more expensive) coke and the whole process has a useful by-product – gas – which can be used as fuel to produce hot-briquetted iron.

A more detailed list of the top crude steel producers is shown in Exhibit 9. China is of course the great outlier, forging more than 50% of world steel. India, Japan and South Korea are the top Asian producers, with Germany, Turkey, Italy and France in Europe, Brazil and Mexico in Latin America and other traditional producers such as the US, Russia and Ukraine completing the list. Finally, Exhibit 10 lists the top 20 steel producing companies. In 2020, ArcelorMittal fell for the first time from the top the list, giving its place to China's Baowu. As the reader can notice, the top 10 list is dominated by Chinese producers, with only Nippon Steel and POSCO from Japan and S. Korea respectively.

Basic Oxygen Furnace

In the BOF method, scrap (25%) and molten iron (75%) are charged into a vessel – the converter. A water-cooled oxygen lance is lowered into the furnace and high-purity oxygen is blown on the metal at very high pressure. The oxygen combines with carbon and other unwanted elements, thus eliminating the impurities from the molten charge. These oxidation reactions produce heat, and the temperature of the metal is controlled by the quantity of the scrap added. The carbon leaves the converter as a gas (carbon monoxide) which can, after cleaning, be collected for re-use as a fuel. During the ‘blow’, lime is added as a flux to help carry off the other oxidised impurities as a floating layer of slag. Modern converters will take a charge of up to 350 tons at a time and convert it into steel with a charge-to-tap time of 40 minutes or less.

Other Methods

With the exception of open-hearth steelmaking, which is now obsolete, the only other alternative method is the High Frequency Induction Furnace. The process uses electricity to melt a charge of cold scrap, but it does it using a coil, rather than cathodes. Furnaces of this type are usually less than 5 tonnes capacity.

A number of secondary metallurgy methods are used to rid the steel from some harmful elements, which result from the oxygen process. More specifically, secondary metallurgy methods are used to: improve homogenisation of temperature and composition; remove deleterious gases, such as nitrogen, oxygen and hydrogen, in the steel; allow careful trimming of composition to exact ranges of analyses; remove phosphorus and sulphur; and refine the quantity of other metallic elements in the steel.

Steel Processing

When the molten steel forms at the bottom of the oxygen converter, or the electric furnace or after secondary processing, it is poured – or tapped – into a ladle; at this stage the steel has an average carbon content of less than 1% and any alloying elements that need to be added are charged to the hot metal at this stage. The next step is moulding, which aims to form the steel in usable final products.

The process works as follows:

• a ladle of steel is brought to the continuous casting plant by overhead crane;

• after pre-treatment, which may involve stirring by the injection of an inert gas (argon), the open mouth of the ladle is covered by an insulating lid, to reduce heat loss;

• the whole unit is lifted by crane onto a rotating turret – this makes sequence casting possible, i.e. a number of ladles of the same grade steel can be cast without stopping the machine;

• the ladle nozzle is opened, allowing the steel to flow out of the ladle, through a gas-tight tube, into the tundish, a reservoir supplying the water-cooled copper mould of the casting machine, at a controlled rate;

• with only its outer shell solidified, the steel is then drawn downwards from the bottom of the mould through a curved arrangement of support rolls and water sprays until it emerges horizontally as solid steel from the discharge end of the machine, where it is cut by automatic gas cutting equipment to the lengths required.

Consumption

Steel is ubiquitous in everyday life. From buildings, to cars, bridges, white goods, motors, ships, railways; the list goes on. Steel is extremely versatile and from the basic semi-fabricated slabs, blooms and billets, a myriad of products of all shapes and sizes can be fabricated. Some of the fairly common such shapes are covered later on, under the trade section. Broadly speaking, steel goods are used in building construction and infrastructure (over half of steel consumption, as can be seen in Exhibit 18), mechanical equipment, automotive and other transport, metallic consumer products, electrical equipment and consumer appliances.

As one would expect, China is not only the biggest producer, but also its biggest consumer, driven by its huge manufacturing base. Since the beginning of the millennium, China's economic growth was driven by expanding heavy industries, such as steel, which has been used to expand infrastructure, building construction, energy generation, railways, shipbuilding, automotive manufacturing and, indeed, every type of manufacturing. Almost half of global steel consumption is attributed to China, as can be seen in Exhibit 19. An additional 20% of consumption is in Asia, with India now leading the pack. N. America and Europe, which used to be the engines of industrial growth in previous decades, now only contribute together ~15% of world demand.

Pricing and trade

From the discussion above, three main points emerge, which have a bearing on the way international markets for iron ore are organised.

• iron ore is almost exclusively used for the production of steel;

• steel mills are the only customers of iron ore mines and, although scrap can be used to a certain extent, iron ore is by far the most important raw material for steelmaking;

• there are only very few dominant iron ore producing countries, which have large capacities and low costs, and dominate the supply side.

Because of these peculiarities, the procurement of iron ore supplies is handled directly by iron ore producers and steel mills. There is less scope for the existence of trading companies, although such companies do exist and frequently act as agents between smaller mines and steel mills.

As we have seen, steelmaking is a continuous procedure. A blast furnace needs a minimum throughput in order to operate at all, and production cannot be halted, except for necessary repairs to the refractory lining; it is paramount that iron ore feed be continuous and guaranteed. It is not surprising, therefore, that steel producers have always tried to achieve some stability and security in the procurement of their iron ore requirements.

In the 1950s and 1960s many steel mills, particularly in the United States, tackled the problem of supply security through the acquisition of equity stakes in both domestic and foreign iron ore mines. The Japanese, on the other hand, followed a strategy of arranging long-term contracts (LTCs) – usually of 10-20 years, but some of them even evergreen – that would guarantee their supply requirements. Such contracts were also desirable for the mines because they provided them with a substantial collateral, on the back of which debt could be incurred to finance further expansion.

Today, even though direct equity stakes are still in existence, most steel mills secure their supplies through LTCs. Iron ore contracts come in a variety of formats, depending upon the time and duration of the agreement. However, while in the 1970s LTCs of 10 years or more were commonplace, in the 1990s it became difficult to find any contracts with terms more that 5 years. The 2000s saw a dramatic change in iron ore trading, with the advent of a number of smaller or larger Chinese steel mills who wanted access to higher volumes and quality of iron ore and started tapping the international market. Although LTCs were used, quite a lot of the trade was done on the basis of spot and short-term (less than a year) basis.

Originally, most LTCs were quoted on FOB terms, with the exception of contracts between Australian mines and European mills which are negotiated on a CFR basis. Nowadays, the key price indices report prices for iron ore delivered on a CFR basis in Chinese ports. Some of the most important features of LTCs include: 

Pricing

Since the first LTCs were initiated in the 1970s, price determination for iron ores was a most intriguing and perplexing procedure, taking place once a year. Since 2009, this has changed, with prices now more reflective of spot market conditions. The price quotation itself is fairly straightforward, at least in comparison to other metals, although rather different to other commodities. 

There is no truly ‘international’ reference price for iron ore, in the way that the price of a barrel of Brent crude is. Ore qualities differ widely and it is common that ores from different mines have their own quotations. It is also common that prices are quoted for different types of ore; usually lumps, fines, pellets, and sinter. 

Prices are quoted in two different ways. The first one is to simply quote the price per dry metric ton (dmt)[14] of ore, while at the same time specifying the type of ore shipped (e.g. lump ore, fines, pellets etc.), as well as the amount of iron contained in the ore as a percentage, known as the Fe% content.

The alternative method is to quote prices on the basis of dry metric ton units (dmtu).[15] 

Prior to 2009, prices in the iron ore market were re-negotiated and settled once a year. There were two distinct markets: Japan and Europe. The Japanese steel mills started negotiations, around November each year, with each of the Australian ore producers and with Vale (then CVRD) of Brazil. In the European market, negotiations started at about the same time, and were usually conducted between CVRD and two agencies representing interests of German steel mills – Rohstoffhandel and Erzkontor. Price negotiations usually carried through to the beginning of the following year, developing into a ‘war of words’, with suppliers and consumers trying to demoralise each other.

Although the annual price negotiations were somewhat cumbersome, both mines and steel mills had settled quite happily in this regime which resolved the pricing issue in a market which was essentially a bilateral oligopoly.[16] The status quo started creaking from the mid-2000s, particularly from 2005 onwards. The steep growth of China was largely fuelled by the expansion of heavy industry and manufacturing. At the centre of this growth was the expansion of the steel industry, which provided the much-needed products for new construction, engineering and infrastructure projects. Domestic iron ore production was not sufficient, so many Chinese steel mills turned to the international market. Only a handful of Chinese steel mills, however, had the bargaining power to negotiate LTCs with mines, or even invest in mines to secure supplies. Numerous small Chinese steel mills had to resort to the spot and short-term market to secure iron ore shipments and to do this they frequently had to pay well above prices for LTCs.

This practice gave rise to a parallel spot market whereby prices continuously and increasingly exceeded annually negotiated prices and increased the temptation for many mining companies to sell spot rather than commit their production to LTC contracts. What was a temporary market anomaly eventually became the new market reality.[17] Mining companies, led by BHP Billiton, pushed for a switch to a market-led pricing system. Eventually, from late 2009 LTC contracts started being priced on a quarterly basis, with prices calculated as averages of the prevailing spot prices in the three previous months.

The reader can observe this development in Exhibit 19, which shows monthly prices for iron ore fines imported in the port of Tianjin in northern China. Prices remained stable from 1978 to 2004, with changes implemented every twelve months and only modest fluctuations between $20-$30/dmt. Between 2005 and 2009 there was a big price hike, although changes are still implemented only once a year. From the beginning of 2010 prices fluctuated freely and changes are observed every month, effectively reflecting spot market transactions.

Since the paradigm shift in pricing, market reporting agencies have taken a more active role in reporting iron ore prices. Three key price indices have emerged: MBIO[18], IODEX[19] and TSI.[20] With the spot market at the heart of the current pricing system, these benchmarks are necessary for market participants, whether in physical cargo deals or for settling financial derivatives used for hedging purposes.

Steel Pricing

Pricing of steel products can be quite complicated, because of the large diversity of products, in terms of quality and shape. In Europe and the United States, things are simplified by the publication of official lists of prices by individual mills, which are usually valid for a year. Prices are quoted primarily for the most basic steel products, which have low-grade and shape specifications. Any additional finishing, shaping, cutting to size, or coating is charged as an extra to the basis price. Steel mills and consumers normally limit their price negotiations to the determination of the basis price and of any quantity discounts that may be offered for bulk purchases. In Europe, surcharges are usually accepted by buyers, who concentrate on negotiating basis prices. In the United States even surcharges are the object of negotiations. 

Pricing of steel exports is usually further simplified – in order to facilitate transport and paperwork – and prices are usually quoted on an average, per ton basis. Quotations are also available on an FOB, CFR, or CIF basis.

In Japan, prices are less transparent and also less volatile. If there is a need for drastic changes, the burden is usually shared between mills and consumers.

While steel pricing is quite straightforward in Europe, Japan and the States, other nations (in particular Eastern European mills) do not normally work with price lists. There, all quotations are on a client-to-client basis as per request. Export pricing is also on the same basis.

In the UK, an attempt was made to create an international steel price benchmark with the introduction of a steel billet futures contract which was initially traded both in the ring of the London Metal Exchange and on their electronic platform LMESelect. After initial success, the contract lost its popularity and was eventually withdrawn. In its place, a number of contracts for other steel products emerged, which are all traded on the electronic platform. At the time of writing, there were contracts for HRC, rebar and scrap.

As it has become evident from the discussion so far, China is the dominant force in both iron ore and steel. Steel contracts, especially rebar, are traded on SHFE in Shanghai and the city has become a trading hub for spot and futures contracts, generating several benchmarks. Although these prices reflect domestic demand and supply conditions, China has such a powerful presence in the international market that Chinese steel prices can be considered as a global benchmark. Exhibit 20 shows a selection of steel product prices from the Shanghai market, expressed in US dollars for convenience.

Trade

About 75% of the world production in iron ore is traded internationally and Exhibits 23 and 24 show details of the key exporters, in terms of volume and value. In 2024, world exports stood at around 1.69 billion tonnes, ca. 75% of which were shared by just two countries – Australia and Brazil. Other important – although much smaller – exporters were South Africa, Canada, India and Sweden. Australian exports are almost exclusively destined for Asia Pacific, primarily China, Japan, South Korea and other countries in the region, with only a small flow to the EU market. Brazilian exports also have a bias towards Asia Pacific, owing to Chinese and Japanese demand, although there are still sizeable quantities channelled to EU countries. 

Canadian exports are primarily directed to the United States; however, Canadian companies are also very active selling their ore to Europe. Indian exports, although much reduced in recent years, compete directly with those of Australia in Asian markets, while South Africa targets both European and Asian markets. Finally, Sweden exports practically all of its production to other European countries.

As demonstrated by Exhibits 25 and 26, iron ore imports are even more biased towards Asia Pacific – primarily China, but also Japan and South Korea. In 2024, China imported ca. 75% of all iron ore traded internationally, while the rest of Asia imported another 15-20% of it. Trailing behind are EU countries who collectively imported the majority of the remaining imports. Exhibit 27 shows the details of bilateral iron ore trade flows between the key trading regions for 2024.

The vast majority of iron ore trade, ca. 90%, is carried by sea. The remaining tonnage is accounted for by trade between United States and Canada, and between the CIS and other Eastern European countries. The major characteristic of iron ore transportation is the need to take advantage of scale economies, in order to justify the movement of such a bulky and relatively low value cargo over long distances.  Thus, the vast majority of iron ore is carried in vessels of over 100,000 dwt, typically Capesize bulk carriers, between 150-200,000 dwt. The largest ore carriers are twice that size, with the Valemax class of vessels just touching 400,000 dwt. Exhibit 28 demonstrates the development of iron ore trade since 1990. Throughout the 1980s and 1990s trade fluctuated between 300-400 mtpa. From early in the new millennium, especially from 2005 onwards, trade expansion picked up pace and tonnage has tripled in comparison to 2000 – another manifestation of the sea change brought about in this commodity by the Chinese economic expansion.

Steel trade

World trade in steel products was about 455 million tonnes in 2025, a figure which – when compared with the ca. 1.9 billion tonnes of crude steel production – indicates that ca. 20% of world steel production enters international trade. This, however, might be an underestimate of the extent of steel trade, because not all of crude steel is turned into products; a part of it ends up as industrial scrap, and is usually recycled into the steelmaking process.

Exhibits 30 and 31 show the top twenty exporters and importers respectively, while Exhibits 32 and 33 narrow down to the top fifteen net exporters and net importers. In 2025, China was the top exporter, a relatively smaller importer, and the top net exporter as a result.

Other top net exporters include Japan, Russia and South Korea, with Ukraine having dropped down this list because of the conflict with Russia. On the net importer side, Thailand, Philippines, Mexico and Vietnam trail behind the Unites States. All are rapidly developing economies and steel is the basis for the expanding construction, transportation and other infrastructure sectors.

In contrast to iron ore, steel products have mixed transport requirements: the more basic, semi-finished products are usually carried as bulk cargo; specialised finished products, on the other hand, are typically carried as unitised cargo, either in multipurpose or container vessels. Below are examples of steel products stacked up and awaiting transportation. Exhibit 34 shows tube sections loaded in the hold of a bulk carrier and being secured in place for transportation. Exhibits 34-37 show other common steel products which are also commonly carried by bulk shipping.

Conclusion

Iron ore and steel are the most basic commodities in all developed and developing nations. Steel consumption is synonymous with industrial growth and strength and, hence, many developing nations seek to establish steel mills as the basis for heavy industry. Iron ore is almost exclusively used in the steelmaking process and is, therefore, closely tied to the fortunes of the steel industry. Although iron ore can be found in most countries around the world, it is only very few countries that produce it efficiently and export it in large quantities.

The stability and security required by the operational characteristics of steel plants have made the use of long-term  contracts for the procurement of iron ore indispensable. However, the emergence of China as a major steel manufacturer has shifted the focus of the whole industry entirely to Asia Pacific. This has not only changed the structure of production, consumption and trade; it has also brought about changes in the pricing structure of iron ore, with the introduction of quarterly re-pricing based on spot market prices.

References

Bolis, J.L. & Bekkala, J.A. (1987). Iron Ore Availability - Market Economy Countries. US Bureau of Mines. 

Crowson, P. (2008). Mining Unearthed. Aspermont. London.

Fish, P.M. (1995). The International Steel Trade. Woodhead Publishing. Cambridge.

Smil, V. (2016). Still the Iron Age: Iron and Steel in The Modern World. Butterworth-Heinemman. ISBN 978-0-12-804233-5

Tamvakis, M. (1999). An Economic Model of the Iron Ore Trade. Ph.D. thesis, City University. London.

Tex Report. (2008). Iron Ore Manual. Tex Report. Tokyo.

US Geological Survey (2024). Iron Ore Statistics and Information. https://www.usgs.gov/centers/nmic/iron-ore-statistics-and-information

World Steel Association (2024). World Steel in Figures 2024. https://worldsteel.org/steel-topics/statistics/world-steel-in-figures-2024