Slow growth forecast for iron ore, steel

The minerals marketing information firm, in a new study on iron ore and the demand for steel, says unequivocally steel will continue to be the basic raw material of industrial society for the foreseeable future. “Industrial society cannot yet survive on high technology alone; the age of the smoke-stack has far from passed,” Roskill writes.

The experience of the steel industry since 1973 has been of transition from high growth to low growth, made much more difficult by the abruptness of the shift, says the report. It was further complicated by widespread and understandable reluctance to admit the shift had actually — and irrevocably — taken place.

As late as 1982, a return to steady growth was still optimistically being forecast. The early 1980s halted these flights of fancy, Roskill reports; to the turn of the century, growth in world production of crude steel is expected to average less than 1% per year. Effect of energy prices

According to the report, the immediate cause of the protracted crisis in steel was the two successive steep hikes in energy prices in the 1970s. Roskill says renewed apparent stability in oil prices has not resulted in renewed growth in demand for steel, either actual or projected. Two basic reasons are given: one is connected with the nature of economic growth in general, and the other with the huge disparity between the level of economic development of the industrialized countries and that of the major developing countries.

The Third World was believed to offer a large growth potential; however, Roskill writes such beliefs ignored the abysmally low level of existing industrial development in the Third World as a whole. While not counting out completely developing nations, Roskill suggests it will be many years before Third World growth can make a significant contribution to total growth in world steel production, given the present levels of demand.

“The outlook to the late 1990s is therefore one of continued very low or zero growth in demand for crude steel,” Roskill writes. “The exceptional performance of a very few countries (South Korea, for example) in no way nullifies this.”

The effect on demand for iron ore is in some ways more severe. Demand for iron ore is almost wholly governed by trends in iron and steel production. Less than 2% of iron-ore output goes into its other end-uses (cement, coal-washing, pigments and specialist aggregates). Different furnaces

Demand for pig iron is not directly proportional to crude steel production. As growth in the latter slows to zero, an increasing proportion of scrap becomes available which in turn increases the scope for use of the more economic electric arc furnace. Since 1973 there has been a massive shift from open- hearth furnaces to either electric arc or oxygen furnaces.

To some extent, the use of sponge iron in electric arc furnaces has sustained demand for iron ore; the effect, however, has been small. In general, Roskill writes, the longer the period of zero growth in steel output, the greater the relative importance of scrap as a raw material for steelmaking. And the more competitive will scrap become in relation to the iron ore — pig iron route.

The consequences for non- communist iron ore producers have been traumatic, Roskill reports. The greatest effect has been in the United States, where the industry in 1989 is, structurally, barely recognizable as the successor of the industry of the early 1970s.

The advantage, Roskill writes, has decisively shifted to the lowest cost producers, chiefly in Brazil and Australia. The pattern of the major components of world iron ore supply has been set for the remaining years of this century.

Writing in the Canadian Minerals Yearbook 1987, B. Boyd and T.R. McInnis of Energy, Mines and Resources Canada report the Canadian iron ore industry has been relatively stable in a changing market. Productivity has increased and cost- control has become a priority. Iron ore exported

Most of the iron ore mined in Canada is exported, with western Europe acting as the country’s largest market for the commodity. The four companies producing iron ore in Canada are the Iron Ore Co. of Canada, Quebec Cartier Mining Co., Wabush Mines (all operating in Quebec-Labrador) and Dofasco (which has taken over Algoma Steel and operates mines in northern Ontario).

The ministry workers cite an average 1987 revenue for Canadian iron ore producers of $33.40 per tonne, the lowest it has been since the beginning of the decade. Canadian production of the mineral is expected to remain in the 35-40 million tonne-per-year range for the medium term.

In 1987, Canadian steel producers turned out 14.7 million tonnes, up 4.5% from the previous year. During the first 11 months of 1988, McInnis said steel production was up 1.4%. (Preliminary figures from the International Iron and Steel Institute place 1988 world production of crude steel at a record 780 million tonnes.)

Long-term projections have domestic demand rising in Canada and offshore steel imports declining. By the turn of the century, Canadian steel production is expected to total 16.5 million tonnes, and perhaps more because of the free-trade agreement.

“If we could become preferred suppliers to the U.S., we could give our steel industry a boost,” McInnis told The Northern Miner, pointing out the U.S. imports about 25% of its steel.

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