B0611 GL

CONTENTS
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December 2015
IBISWorld Industry Report
Global Iron Ore Mining

December 2015
About This Industry ................................. 2

Industry Definition .........................................2
Main Activities ...............................................2
Similar Industries ..........................................2
Additional Resources ....................................2
Industry Performance .............................. 3

Executive Summary ......................................3
Key External Drivers .....................................3
Current Performance ....................................4
Industry Outlook............................................6
Industry Life Cycle ........................................8
Products & Markets ................................. 9

Supply Chain ................................................9
Products & Services .....................................10
Demand Determinants ..................................11
Major Markets ...............................................11
International Trade........................................13
Business Locations .......................................15
Competitive Landscape ........................... 17

Market Share Concentration .........................17
Key Success Factors ....................................17
Cost Structure Benchmarks ......................... 18

Basis of Competition .................................... 20
Barriers to Entry ........................................... 21
Industry Globalization .................................. 22
Major Companies .................................... 23

Companhia Vale do Rio Doce...................... 23
BHP Billiton Limited ..................................... 24
Rio Tinto Group............................................ 25
Other Players ............................................... 26
Operating Conditions .............................. 28

Capital Intensity ........................................... 28
Technology & Systems ................................ 28
Revenue Volatility ........................................ 29
Regulation & Policy ...................................... 29
Industry Assistance ...................................... 32
Key Statistics ........................................... 34

Industry Data................................................ 34
Annual Change ............................................ 34
Key Ratios.................................................... 35
Jargon .......................................................... 35
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About This Industry

Industry Definition
This industry consists of firms that mine iron-bearing ores (primarily hematite, magnetite and taconite). In
addition to ore extraction, mining includes the development of mine sites and the processing of ore mined
into a concentrate or pellet form. The iron ore and iron ore pellets are then sold as an input to blast furnace
steel production.
Main Activities
The primary activities of this industry are:
Mining iron bearing ore
Processing iron bearing ore into pellets
The major products and services in this industry are:
Iron ore fines
Iron ore lump
Iron ore pellets
Iron ore pellet feed
Similar Industries
B0511-GL - Global Coal Mining
Companies in this industry mine various types of coal, which are heavily used in steel manufacturing.
B0632-GL - Global Gold and Silver Ore Mining
Companies in this industry mine gold and silver, and they use similar mining processes as iron ore miners.
B0633-GL - Global Copper, Nickel, Lead and Zinc Mining
Companies in this industry mine copper, nickel, lead and zinc, using similar processes as iron ore miners.
C2311-GL - Global Iron and Steel Mills
Companies in this industry use iron ore as a key feedstock for steel production.
Additional Resources
For additional information on this industry:
comtrade.un.org
United Nations Commodity Trade Statistics Database
www.worldsteel.org
World Steel Association
www.bhpbilliton.com
BHP Billiton Limited
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Industry Performance
Executive Summary
The Global Iron Ore Mining industry's financial performance has been highly volatile in recent years.
Greatly affected by fluctuations in the world iron ore price, the industry weathered sharp spikes and
double-digit declines from 2010 to 2015. After two years of strong growth, iron ore prices and industry
revenue reached record peaks, before softening due to the falling price of iron ore. In 2014 and 2015,
stagnating demand from emerging markets has caused the price of iron ore to crash, taking down with it,
industry revenue. As a result, industry revenue is projected to decline at an annualized rate of 13.6% over
the five years to 2015, to total $143.7 billion.
Recent price weakness has been driven by both high levels of supply on global markets and weakening
demand from emerging markets, most notably China. This strong decline is also influenced by its elevated
starting point in 2010, when iron ore prices were more than double current levels. Consequently, industry
revenue is projected to decline 35.7% over the year, with iron ore prices simultaneously falling 42.8%.
International trade will also be effected, accounting for an estimated 68.9% of industry revenue. Profit has
been similarly decimated, and IBISWorld expects it has declined significantly in the five years to 2015.
Industry performance is expected to stabilize over the five years to 2020, with revenue projected to rise at
an annualized rate of 1.9% to $158.0 billion. The gain reflects global economic growth, increased steel
output and rising iron ore production and prices. These factors will be supported by recovering demand for
steel from emerging economies as well as strengthening developed economies. Profit is expected to be
relatively stagnant, reflecting rising wages and higher material costs (especially of fuel). Furthermore, the
world price of iron ore is anticipated to rise at an annualized rate of 3.1% over the next five years, as high
supply levels ease and demand picks up.
Key External Drivers

The key sensitivities affecting the performance of the Global Iron Ore Mining industry include:
Downstream Demand - Iron & Steel Product Manufacturing
Steel manufacturing accounts for the majority of iron ore demand. Manufacturing raw steel requires
substantial inputs of iron, creating a supply chain connection in which any increase in demand for steelusing products (e.g. automobiles) heightens demand for steel and, consequently, iron. Downstream
demand from iron and steel manufacturing is expected to increase during 2015.
GDP of mainland China
China accounts for the majority of global iron ore demand and the largest share of global iron ore
production. The country's steel-manufacturing sector is the direct purchaser of iron ore, although its
downstream construction and industrial markets also help fuel demand. As China's overall economy
expands, demand for iron ore does as well. The GDP growth of mainland China is expected to increase over
2015, albeit at a slower rate when compared with previous years, representing a potential opportunity for
the industry.
Industrial production index of OECD countries
Demand for industry products is heavily tied to manufacturing activity, particularly steel manufacturing
and metal purchasers such as automobile manufacturers and constructors. As industrial production rises,
demand for products made using steel and upstream iron ore grows as well. The industrial production
index of OECD countries is expected to increase during 2015.
World price of iron ore
The world price of iron ore is positively correlated with industry performance, with higher prices driving
up revenue and profit. The price is set by the interaction between supply and demand, with demand for
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December 2015
iron ore increasing almost exclusively in conjunction with demand for steel products. The world price of
iron ore is expected to decrease over 2015, posing a threat to the industry.
Current Performance
The Global Iron Ore Mining industry is heavily dependent on trends in raw steel production and,
ultimately, on trends in economic growth that drive demand for steel. The past five years have exhibited
great instability across global supply and demand conditions, causing the world price of iron ore to
fluctuate wildly. Industry revenue has followed suit, despite steadily growing production volumes of iron
ore. The recent slowdown in China's construction boom has caused the price of iron ore to crash from 2011
peaks, and as a result, the industry is expected to experience an annualized decline in revenue of 13.6%
over the five years to 2015, to reach $143.7 billion.
Rising production
Over the past five years, rapid growth in emerging economies has led to a boom in industrial and
construction activity and pushed up demand for steel worldwide. The rapid industrialization of China, and
to a lesser extent India, caused producers to scramble to lift output by expanding existing mines and
committing to new mine developments. Industry operators responded by increasing their production levels
of steel, thereby spurring an increase in iron ore-mining activity. World production of iron ore has reached
an expected 3.2 billion metric tons in 2015, up from 2.6 billion metric tons in 2010. China currently leads
the world in iron ore production, accounting for an estimated 46.2% of the global output, followed by
Australia (20.3%), Brazil (9.9%) and India (4.6%).
In 2015, 68.9% of industry output is expected to be traded internationally, highlighting the very global
nature of this industry. China's insatiable demand for iron ore has had worldwide ramifications, having
overtook Japan as the world's largest importer of iron ore in 2003. China is expected to absorb over half of
the iron ore traded internationally in 2015. Spurred on by Chinese growth, international trade has
increased over the five years to 2015, if measured by volume. However, with the recent sharp fall in iron
ore prices, the level of trade has declined in value, falling at an annual average of 11.4% to an expected
$99.0 billion in 2015. While China is clearly the largest importer, Australia is the largest exporter, followed
closely by Brazil.
Prices rise and fall
Soaring demand resulted in spot iron ore prices reached a cyclical peak of about $200 per metric ton in
February 2011, as Chinese buyers stockpiled the ore in expectation of rising steel demand after the Lunar
New Year. The price rise also reflected constrained availability. Indian iron ore export bans and import
tariffs limited worldwide supply in 2011, helping fuel a 15.0% price increase over the year. Average iron ore
prices reached $167.8 per metric ton over 2011, causing industry revenue to reach a record peak of $362.4
billion in revenue for that year.
In 2012, however, a slowdown in China's economic growth and continued weakness in European markets
pushed prices down an estimated 23.4% to $128.5 per metric ton. As a result, the plummeting prices in
2012 pushed revenue down 22.0% over the year, before stabilizing in 2013. Price weakness reemerged in
2014 due to continued high levels of supply, while demand from China began to wane as the country
appeared to apply the brakes to the economy after years of breakneck growth. Consequently, the world
price of iron ore is expected to decline at an average annual rate of 17.6% over the five years to 2015,
including plummets of 28.4% and 42.8% in 2014 and 2015, respectively.
Profitability
As prices have remained weak, revenue in the Global Iron Ore Mining industry is projected to decline.
Demand from emerging economies such as China have been a constant driving demand for industry
products, but recent weakness in iron ore prices is anticipated to result in a revenue decline of 35.7% in
2015 alone. Falls in revenue directly affect industry profitability, because mining operations have a large
proportion of fixed costs. Industry profit has thus been similarly dampened, falling to an estimated 20.2%
in 2015, down from 45.0% in 2010.
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Large companies are best able to weather the low price environment, with small operators constrained by
liquidity pressures and less ability to diversify resources. Over the five years to 2015, the number of
operators has declined at an annualized rate of 4.7% to 5,661, with many of these being very small
operators in developing countries. IBISWorld anticipates that many of the small-scale operations will
increasingly have difficulty competing with large integrated operators. The largest industry players tend to
outperform small operations due to economies of scale. This trend has been steady in the past five years
and consistently encouraged industry consolidation. Falling profitability and the decline in industry
operators has caused employment to fall at an annualized rate of 2.1% to an estimated 934,055 employees
in 2015.
Consolidation activity
The Global Iron Ore Mining industry has been consolidating almost continuously since the 1970s.
Currently, the three largest companies, Vale, Rio Tinto and BHP Billiton, together account for nearly a
third of industry revenue. In 2007, BHP Billiton made merger overtures to Rio Tinto. Rio Tinto rejected
the proposed offer, stating that it undervalued the company, and also rejected a subsequent higher offer.
The other major iron ore producer and exporter, Vale, reacted positively to the merger proposal. However,
steel mills, particularly those in China, were concerned about the concentration of supplier power that such
a merger would represent. The global recession, together with concern over Rio Tinto's debt levels, resulted
in BHP Billiton withdrawing its merger bid in December 2008.
Steel producers, faced with volatile iron ore prices over the past few years, are taking a renewed interest in
vertical integration through acquiring iron ore assets. This trend, pursued with considerable vigor by the
world's largest steelmaker, ArcelorMittal, reversed developments in the 1990s when at least some
steelmakers moved to divest their iron ore operations. Currently, the Japanese company Mitsui, a major
steel producer, has a substantial stake in the largest iron ore miner Vale and joint-venture interests with
BHP Billiton in most of its Australian operations.
Shortened time frames
Some of the largest mining companies in the industry have shifted to shorter contracts over the past couple
of years in order to take advantage of high and rising iron ore prices. Contract prices for iron ore had been
set in annual negotiations since the 1960s. The benchmark iron ore export prices were set in negotiations
between major steel producers in Japan and China and major iron ore exporters in Australia and Brazil. A
key drawback of the system, under which contract tonnages were also set, is that as the year progressed,
prices on the spot market and contract prices could diverge markedly.
In March 2010, BHP Billiton, the world's third-largest miner of iron ore (behind Companhia Vale do Rio
Doceand Rio Tinto Ltd), announced that it had reached an agreement on quarterly contracts with a
significant number of its Asian customers. In April 2010, Vale and Rio Tinto each made similar statements,
with 90.0% of Vale's iron ore sales contracted under the new quarterly basis. Generally, rising prices for
iron ore have led the push for monthly contract terms. In 2011, BHP Billiton and Rio Tinto sold a
substantial proportion of their iron ore output on a monthly basis, but Vale remained with the quarterly
pricing system.
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Industry Outlook
The main factors influencing the performance of the Global Iron Ore Mining industry during the five years
through 2020 will be trends in steel production and the supply and demand position for iron ore. Despite a
recent slowdown, steel-intensive manufacturing and construction activity in large developing economies,
such as China and India are expected to continue expanding at a steady rate over the five years through
2020. Continued industrialization of emerging markets is projected to spur modest average annual
revenue growth of 1.9% to total $158.0 billion in the five years to 2020.
Growing supply and recovering demand
With continuing industrial expansion in China and India, the demand for iron ore is forecast to recover
from recent weakness, setting the scene for an increase in iron ore production and prices. The four largest
producing countries, China, Australia, Brazil and India, will account for the bulk of this growth, reflecting
the construction of large, new mines and mine expansions in each of these countries. However, other
nations will also make substantial contributions to rising iron ore output. Iron ore production in Russia,
the Ukraine and Kazakhstan is expected to expand strongly, reflecting renewed investment both by local
governments and companies, as well as foreign operators.
However, increasing production is expected to bolster supply levels. Steel production will continue to be
strong over the next five years, especially as emerging markets seek to expand infrastructure. Most steel
produced worldwide will continue to be produced by blast furnaces, which use iron ore as a key input,
rather than by electric arc furnaces, which use scrap steel. In particular, most new capacity in China and
India is expected to be in the form of blast furnaces, thereby supporting iron ore demand as steel
production grows.
Building a global network
Over the next five years, steelmakers are expected to continue vertically integrating with suppliers by
acquiring iron ore operations, or at least taking a strategic stake in them. Chinese steelmakers, stung by
high iron ore prices as their demand for this commodity continues to expand strongly, are taking an
interest in operations in Australia and Brazil. Similarly, ArcelorMittal, the world's largest steelmaker, has
stated that it will continue to expand its iron ore operations.
The international trade in iron ore is also expected to continue growing, largely in response to robust
demand from China and the increasingly globalized supply chain. Most of the production increases in
Brazil and Australia will be directed to satisfying demand for iron ore from Chinese steelmakers. Although
China's domestic iron ore production will rise, growth in demand from its steel industry will expand more
rapidly, and it will continue to draw in a large and growing volume of imports. Therefore, links between
customers in China and the major exporting companies are expected to strengthen. Not only will Chinese
companies seek to gain ownership stakes in new mines overseas, but iron ore miners may also acquire
interests in Chinese operations. Trade of iron ore will grow over the five years to 2020, at an estimated
average annual rate of 3.7% to $118.9 billion.
Steel demand and production in India are also expected to expand rapidly in response to continued
urbanization and industrialization. Unlike China, India will remain a net exporter of iron ore, although
growth in its iron exports will be constrained by the expansion of the local steel industry and the Indian
government's focus on giving priority access to local iron to steelmakers operating in India. A return to
stronger economic growth in the United States and Europe is also expected to underpin rising demand for
steel in those areas over the five years through 2020.
Profit performance
Prices are expected to continue fluctuating over the five years through 2020, rising when supply tightens
and dropping when supply pressures ease in response to increased mine output. However, fluctuations will
be more modest than those recorded in the past five years. A steady increase in production will allow
supply to more closely match demand, preventing prices from climbing too high or falling too steeply. Over
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the next five years, IBISWorld projects the world price of iron ore to recover from recent weakness,
growing at an annualized rate of 3.1% to $64.5 per metric ton.
Overall, industry performance is expected to improve over the five years through 2020, as prices stabilize
and operational capacity improves. Industry revenue is expected to grow, but profit will be relatively
consistent as employment and wages rise and as materials costs (especially of fuel) will continue to mount.
Meanwhile, companies will continuously focus on productivity gains and cost containment. Growth in the
volume of iron ore output and the opening of new iron ore mines will ensure that industry employment
expands over the next five years, pushing it up at an average rate of 1.9% per year to 1.0 million people.
Additionally, the number of operators is anticipated to grow at an annualized rate of 0.3% to an estimated
5,742 companies.
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Industry Life Cycle

This industry is in the mature stage of its life cycle.
Life Cycle Stage
Iron ore output and industry value added are expanding slower than world GDP
Rapid growth in output reflects rising demand from Chinese steel producers
The industry is highly exposed to price fluctuations in iron ore
Global iron ore production has been robust, with increases in production outstripping demand growth over
the 10 years to 2015. As demand from China slows, the large industry players will be challenged to bolster
their portfolios of mining projects. Over the 10 years to 2020, IVA is expected to decline at an annualized
rate of 8.8%. In comparison, world GDP is expected to increase at an average annual rate of 3.4%;
therefore, the industry is declining as a share of the global economy.
The decline represents the weakness of China's market for iron ore and steel. The rapid expansion of
China's steel industry not only spurred a large increase in its own iron ore production, but it also
encouraged the iron ore production of other nations. This year, China is expected to account for over half
of global demand for iron ore. However, whenever Chinese demand declines, global iron ore producers are
challenged to adjust production to maintain margins and to ensure available markets for production.
Although the industry has well-known products and well-established technology, Chinese participation in
the industry outside of China is expanding, albeit from a very small base. Other new players are also
entering the industry, with smaller mining operations being established in major producing countries such
as Australia. For instance, Fortescue Metals Group of Australia has grown at a breakneck pace over the
past five years as it has invested heavily in mines and iron ore transport infrastructure. Much of
Fortescue's production is feeding Chinese demand.
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Products & Markets

Supply Chain
Key Buying Industries
B0633-GL - Global Copper, Nickel, Lead and Zinc Mining
Lead refineries use iron ore in the smelting process.
C2311-GL - Global Iron and Steel Mills
Virtually all iron ore output is used to manufacture steel.
Key Selling Industries
B0711-GL - Other Global Mining and Quarrying
Iron ore pelletizing requires clay as an input.
B0811-GL - Global Oil and Gas Mining Support Services
Firms mining iron ore make use of contract miners and other contract support services.
C1911-GL - Global Oil and Gas Refining and Marketing
Iron ore miners require substantial volumes of fuel for mining and iron transportation.
C2512-GL - Global Mining and Oil and Gas Field Equipment Manufacturing
Miners purchase large-scale machinery for various mining activities, such as drilling, crushing and
conveying.
D3111-GL - Global Electric Utilities
Iron ore pelletizing requires considerable amounts of electricity.
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10
Products & Services

Iron ore fines
61.5%
Iron ore lump
19.2%
Iron ore pellet feed
7.8%
Iron ore pellets
11.5%
The Global Iron Ore Mining industry mines various types of iron ore, including lump ore, iron ore fines
and iron ore pellets, which in turn include pellets and pellet feed. Both ore and pellets are used as feedstock
for steel production in blast furnaces.
Ore
Fine iron ore, or iron ore fines, is iron ore that is less than six millimeters in size. Most ore consists of fines
(small particles) that are beneficiated to increase iron content and agglomerated into materials that can be
charged in blast furnaces (for steel production) more easily. Fine ores are screened ores that are primarily
sold to sinter plants and are typically cheapest product available to the steel industry blast furnaces. Fine
ore makes up about 61.5% of industry revenue. Iron ore lumps are iron ores that range in size from six
millimeters to 30 millimeters. Lump ore makes up about 19.2% of industry revenue. Both fine and lump
iron ore have grown in popularity over the past five years because of their lower cost than pellets.
Pellets
Iron ore pellets, including pellets and pellet feed (extremely fine iron ore with particles 0.1 to 1 millimeters)
together make up 19.3% of industry revenue. Pellets consist of iron ore that has been formed into small
balls and baked for easier handling. These attract higher prices than concentrates or raw iron ore.
Typically, lower grades of iron ore are pelletized, a process that involves binding fine ore particles into
pellets and baking them. The share of total output that iron ore pellets account for has declined during the
past five years, although pellet production increased in absolute terms. Iron ore pellets face a cost
disadvantage compared with iron ore, mainly due to fuel costs associated with the pelletizing process.
Rising fuel prices during the past five years have heightened this cost disadvantage.
The pelletizing of iron ore produces spheres and involves agglomeration and thermal treatment processes
to convert the raw ore into pellets with characteristics appropriate for use in a blast furnace and grades of
67.0% to 72.0% iron. Additional materials are added to the iron ore to meet the requirements of the final
pellets. This is done by placing the mixture in a pelletizer, which can hold different types of ores and
additives, and mixing to adjust the chemical composition and the metallurgic properties of the pellets.
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Demand Determinants
The most important use for iron ore is as the primary input to iron and steel making. Therefore, the
demand for iron ore is heavily dependent on the volume of steel production and, in particular, the blast
furnace output of steel. Blast furnaces rely on iron ore inputs, while arc furnaces rely on scrap steel as a key
input. In addition to demand from steel manufacturers, small quantities of iron oxide minerals are used in
cement manufacturing, lead refining, paint manufacturing and nonferrous alloying.
Because the vast majority of iron ore mined is used for steel production, the key drivers for steel demand
also determine demand for iron. In addition, demand for steel is dependent on other industries, as it is
used as an input for the manufacture of downstream products. Specifically, the construction, machinery
manufacturing and transportation sectors are the primary consumers of steel. The global recession
severely slashed purchases of steel from these markets, reducing steel manufacturers' demand for iron
inputs and forcing major iron ore mines to curtail operations and temporarily close. Demand from the
automobile manufacturing sector rebounded strongly in 2010, and combined with strong demand for iron
and steel from emerging economies (e.g. China), the price of iron ore also bounced back that year.
China has been the key driver of global demand for iron ore over the last few years. Although China largely
withstood the global recession, a contraction of China's economic growth could result in lower demand for
iron, leading to lower global iron mining revenue. Poor performance in the Chinese real estate sector, the
largest consumer of steel in China, could also negatively impact demand.
Speculation of and perceived trends in iron and steel prices also have an effect on the demand for iron ore.
When prices are rising, purchasers rush to lock in favorable prices. When prices are falling, purchasers
postpone decisions, hoping to obtain a lower future price and then only purchase what is absolutely
necessary. Like other commodities, global market forces heavily influence the price of iron ore. In the five
years to 2020, the world price of iron ore is anticipated to decline as high supply levels continue to weigh
on price performance of the metal.
Major Markets
Steel manufacturers - China
55.0%
Steel manufacturers - rest of the world
32.0%
Iron ore processors
9.6%
Other industrial markets
3.4%
The vast majority of industry revenue is generated from iron ore processors (for steel production) and steel
manufacturers.
Steel manufacturers
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Steel manufacturers currently generate about 87.0% of total iron ore production revenue. Within this
segment, IBISWorld includes sales by iron ore miners to steel manufacturing divisions within their own
respective companies, along with those shipped to unrelated steel mills. Intracompany sales of iron ore
have increased over the past decade as steel manufacturers have vertically integrated, acquiring the assets
of iron and coal suppliers.
China
Over the five years to 2015, the volume of iron ore traded and the volume of production have increased
substantially. A large part of the increase in production has occurred because of rising demand in
developing countries, with China now making up the majority of world demand for iron ore and steel.
China's steel mills demand the most iron ore input because they consume nearly all of their steel output to
keep up with their rapid industrialization. As a result, China is a large and growing importer of iron ore. It
absorbed a large portion of the growth in volume of the iron ore traded from 2010 to 2015, but has also
lifted its own iron ore production substantially. Steel manufacturers in China are expected to make up
about 55.0% of iron ore manufacturing revenue in 2015, having expanded since 2010.
Rest of the world
Steel manufacturers in the rest of the world together account for about 32.0% of industry revenue.
Although absolute demand for iron ore from steel manufactures has risen worldwide, it has grown at a
slower rate than Chinese demand, and thus currently accounts for a smaller percentage of industry revenue
than it did in 2010.
Other
Shipments to iron ore processing plants will account for about 9.6% of the value of industry revenue in
2015. Other purchasers of iron ore products make up a relatively small portion of industry revenue at
roughly 3.4%, a share that has been stable over the past five years. In particular, nonferrous metal
manufacturing industries use iron ore in lead refining or other metal alloying where iron is the secondary
metal. For example, iron ore is used for the production of alloys like kovar (iron and cobalt), invar (iron
and nickel) or spiegeleisen (iron mixed with manganese, carbon and silicon). Iron ore is also used, albeit to
a relatively small extent, in paint manufacturing and cement production.
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International Trade
Exports in this industry are high and decreasing.
Imports in this industry are high and decreasing.
Global trade in iron ore is substantial, with about 68.9% of total industry output (by value) being traded
across national borders. Demand from China and increased production from Australia and Brazil has
increased this figure from 60.8% in 2010. It is worth noting that higher grades of iron ore generally attract
higher prices, boosting the value of trade for such countries that produce high-grade ore.
Iron ore is primarily traded across regions. The two major iron ore exporting countries are Australia and
Brazil, both of which sell primarily outside their own regions (Oceania and South America, respectively).
These countries supply iron ore to China, the world's largest importer of iron ore. Nevertheless, some
intraregional trade also occurs. For example, Canada exports iron ore to the United States, while producers
such as Sweden, Russia and the Ukraine export iron ore to other countries within the European region.
Trade is anticipated to decline at an annualized rate of 9.6% in the five years to 2015. Much of world trade
in the past five years was spurred on by insatiable steel demand from China, which underwent a
construction boom and intense industrialization. Since 2014, economic growth has slowed in China,
reducing exports to China as well as the value of industry trade, due to the decline in the world iron ore
price.
Exports
At an individual country level, the main iron ore exporters (by volume) are Australia, Brazil, South Africa,
Ukraine and Canada.
By region, the major iron ore-exporter is Oceania, which accounts for 51.3% of the total volume of iron ore
traded internationally. Australia is the source of virtually all of the region's output and exports. The second
largest iron ore-exporting region is South America (about 25.4% of global iron ore exports), where Brazil is
the major producer and exporter. Africa and the Middle East region makes up 8.6% of global iron ore
exports. Besides South Africa, Mauritania and Sierra Leone are significant exporters. Europe makes up the
fourth major iron ore exporting region, accounting for an estimated 8.1% of exports. Much of its trade is
intraregional (for example, iron ore from Russia, Sweden and the Ukraine is exported to a range of EU
countries). Russia also imports iron ore from Kazakhstan and the Ukraine. Most of North America's iron
ore exports (about 3.8% of the world total) are intraregional. In particular, iron ore is traded between
Canada and the United States. The region's major iron ore exporter is Canada. Southeast Asia, where very
little iron ore is mined, accounts for a negligible proportion of iron ore exports and no iron ore is exported
from North Asia. Although China mines substantial volumes of iron ore, its output is used by the domestic
steel industry.
Imports
The major iron ore importing countries are China, Japan, South Korea, Germany and the Netherlands.
On a regional basis, by far, the major iron ore-importing region is North Asia (about 83.1% of the total by
volume). China alone accounts for about 65.0% of the volume of global iron ore imports, which is over half
of total industry value. Japan and, to a lesser extent, South Korea and Taiwan are also major importers of
iron ore. Europe is the second major iron ore importing region, accounting for about 12.6% of the total by
volume. A number of countries within Europe are substantial importers, most notably Germany, the
United Kingdom, France, Italy and the Netherlands. Africa and the Middle East region accounts for about
2.2% of global iron ore imports, followed by North America with about 1.5%. The major importers in Africa
and the Middle East are Saudi Arabia and Iran. In North America, the major importer of iron ore is
Canada, which is also the region's major exporter. Most of Canada's integrated steel mills are located in the
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Great Lakes area and relatively low transport costs make iron from the major US producing states of
Minnesota and Michigan competitive. South America accounts for about 0.5% of global iron ore imports.
Most of this trade is intraregional and the major importers are Argentina and Trinidad and Tobago.
Southeast Asia's share is also about 1.0%, fairly evenly split between the Philippines, Malaysia and
Indonesia. India and Central Asia, and Oceania each absorb less than 1.0% of global iron ore exports.
Turkey accounts for the most iron ore imports into the India and Central Asia region, and Australia
accounts for virtually all the imports into the Oceania region.
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Business Locations
Region
North Asia
48.1
Oceania
21.2
South America
10.3
Europe
7.7
India & Central Asia
5.6
Africa & Middle East
3.9
North America
3.2
South East Asia
0.0
The geographic spread of iron ore production broadly reflects the distribution of iron ore resources. World
resources are estimated to exceed 800.0 billion metric tons of crude ore containing more than 230.0
billion metric tons of iron. According to the latest data from the United States Geological Survey, world
production exceeded 3.2 billion metric tons in 2014.
The Ukraine, Russia, Brazil, China, Australia, India and Kazakhstan account for the vast majority of the
world's recoverable iron ore reserves. The regions that these countries are located in, South America
(Brazil), North Asia (China), Oceania (Australia), India and Central Asia (India and Kazakhstan) and
Europe (the Ukraine and Russia) are the main iron ore producing areas.
North Asia
The North Asia region's output is primarily from China, and in 2014, the US Geological Survey estimates
that China produced 1.5 billion metric tons of crude iron ore. China is by far the world's largest producer of
the metal. North Korea is the only other producer in the region, with output amounting to about 1.0 million
metric tons per year. China's iron ore reserves are of low grade, averaging about 30.0% iron content.
Despite its large iron ore output, China is also the world's largest iron ore importer. China's high level of
iron ore demand reflects its high steel output. In the next five years, IBISWorld anticipates that China will
continue to boost iron ore production as it continues to grow and to require additional infrastructure
development. Additionally, the country will continue to import a significant amount of iron ore due to its
comparatively lower quality domestic output.
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South America
South America produced 320.0 million metric tons of iron ore in 2014, with a bulk of production coming
from Brazil. The other major iron ore producing nations in South America are Venezuela, Chile and Peru.
Brazil is the world's second largest iron ore producer, behind Australia. Although Brazil's domestic steel
industry consumes a substantial volume of iron ore, the bulk of its output is exported. Companhia Vale do
Rio Doce (Vale, formerly known as CVRD), Mineracoes Brasileiras Reunidas (MBR), Samarco Mineracao
and Companhia Siderurgica Nacional (CSN) are Brazil's largest iron ore exporters.
Oceania
Oceania's iron ore production was 660.0 million metric tons in 2014. Almost all output comes from
Australia, the largest iron ore producing country worldwide, behind China (after adjusting China's output
to take account of its lower grade). BHP Billiton and Rio Tinto mine most of Australia's iron ore in Western
Australia. In addition, New Zealand produces about 2 million metric tons of iron ore per year, in the form
of concentrates from titaniferous magnetite beach sands.
Europe
Europe produced an estimated 239.0 million metric tons of iron ore in 2014. The three major producers in
the region are Russia, the Ukraine and Sweden. Russia consumes the bulk of its iron ore output, as does
the Ukraine; however, Sweden exports most of its output, primarily to other countries in Europe.
India and Central Asia
The India and Central Asia region produced 176.0 million metric tons of iron ore in 2014. India is by far
the most substantial producer in the region, followed by Kazakhstan and Turkey. Most of India's medium
to high-grade iron ore reserves are located at Madhya Pradesh, Goa, Orissa, Karnataka and Bihar. The
National Mineral Development Corporation operates India's largest mining operations at Bailadila at
Madhya Pradesh. India is a major exporter of iron ore, with sales directed toward China. Kazakhstan's
largest iron ore producer is the Sokolov-Sarbai Mining Production Association, part of the ENRC Group of
Companies. The Kazakhstan government holds a minority stake in ENRC. Kazakhstan exports a
substantial portion of its iron ore output (about 26.0 million metric tons).
Other regions
North America produced 99.0 million metric tons of iron ore in 2014. The main producers in the region are
the United States and Canada, followed by Mexico. Canada exports a substantial portion of its output,
mainly to the United States.
The Africa and the Middle East region has produced about 123.0 million metric tons of iron ore in 2014,
with the main producers being South Africa, Iran and Mauritania. Mauritania exports virtually all of its
output. Iran's steel industry uses all its output and also imports small volumes of iron ore. Southeast Asia
mines very little iron ore.
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Competitive Landscape
Market Share Concentration
Industry concentration is low.
The four largest companies in the Global Iron Ore Mining industry account for less than 40.0% of industry
revenue, indicating that industry concentration is low to moderate. The three largest companies have high
production capacities, and these companies have historically dominated the industry. They are also heavily
focused on internationally trading in iron ore, and their diverse mineral base ensures they typically have
more capital available to invest in projects than smaller operators.
Industry concentration has increased as the largest companies in the industry, Vale, BHP Billiton and Rio
Tinto, have acquired smaller players. BHP Billiton's decision to abandon its plans to merge with Rio Tinto
announced in late 2007 will keep industry concentration at its current level. Had that merger proceeded,
industry concentration would have increased further over the past five years. IBISWorld anticipates that
these companies will continue to dominate the industry, and they will also continue to acquire smaller
operators to bolster their iron ore reserves.
While China continues to extract its own iron ore, the country's demand for higher quality ores will
continue in the next five years, which will likely benefit the largest players with the largest high quality
deposits. China is the world's largest producer of iron ore, and is home to many small scale operations.
These smaller operations are relatively labor-intensive, employing many low-skilled workers and
producing lower grade iron ore.
Key Success Factors

The key success factors in the Global Iron Ore Mining industry are:
Access to high-quality inputs
Access to large, high-grade reserves of iron ore lowers production costs and typically yields higher prices.
Effective cost controls
Close control over costs is important, as a lean operation is far more likely to survive downturns in demand
or price.
Economies of scale
Large mines based on substantial deposits offer more attractive cost structures.
Downstream ownership links
Ownership links with steel manufacturers permit easier access to markets when demand is weak.
Access to rail and port infrastructure
Rail and port facilities are required to facilitate the movement, particularly the export, of iron ore.
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Cost Structure Benchmarks
Purchases
29.1%
Wages
11.6%
Depreciation
9.3%
Rent & Utilities
7.0%
Marketing
3.1%
Other
19.7%
Profit
20.2%
Profit
The Iron Ore Mining industry is characterized by large long-term projects, requiring large amounts of
investment and a high amount of fixed costs. As a result, per-unit costs in the Global Iron Ore Mining
industry remain fairly steady over time. On the other hand, the selling price of iron ore can change
considerably in relatively short periods of time, and has a large effect on industry profitability.
Such volatility can have drastic effects, positive and negative, on industry profit depending on the direction
of the price movement. Quickly rising iron ore prices up to 2011 resulted in surging profitability for miners.
In 2010, industry profit margins, measured as earnings before interest and taxes, reached 45.0%. However,
when iron ore prices fall, costs typically remain fixed, and put downward pressure on industry profitability.
With the 2015 price of iron ore falling to roughly one-third of its 2011 peak, industry profit has declined to
20.2%. In the next five years, profit is expected to increase slowly as the world price of iron ore is
anticipated to recover from recent weakness.
Wages
Wages are estimated to consume about 11.6% of industry revenue in 2015, up from 5.7% in 2010. This
marked increase reflects both the sharp decline in industry revenue as a result of falling iron ore prices, as
well as the continued increase in the level or world production of iron ore. Labor is a major input in the
industry, yet a fall in demand does not automatically necessitate an equivalent fall in the level of labor.
With industry production levels growing steadily over the past five years, mining companies have
maintained high employee numbers.
The cost of wages varies a great deal from region to region. Mining employees in places such as Australia,
Canada and the United States regularly earn in excess of $100,000 per year, and this is largely due to the
dangerous nature of iron ore mining operations and the technical skills operators require workers to
possess if operating exploration or extraction machinery. Conversely, labor-intensive Chinese mines
employ many more miners, yet these low-skilled miners earn significantly less income, thereby bringing
down average wages for the industry.
Purchases
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The purchase of materials is a major cost item faced by industry operators. These costs fluctuate depending
on demand for industrial inputs and the level of production set by the mining companies. In 2015
purchases are expected to make up 29.1% of revenue, down slightly from 2010.
The importance of purchases reflects the mining process, which relies on inputs such as explosives and
chemicals. A major purchase cost is fuel, which absorbs an estimated 8.0% of revenue. The cost of fuel has
declined in recent years with the sharp fall of world crude oil prices.
Depreciation and other costs
Mining companies invest heavily in major large-scale machinery for activities such as digging, drilling,
blasting, loading, crushing and conveying. New machines (e.g. electric shovels, dump trucks and
conveyors) and equipment are purchased on an ongoing basis and their depreciation consumes an
estimated 9.3% of industry revenue. The depreciation share of revenue has increased from 4.0% in 2010 as
production has increased and machinery has needed to be replaced or repaired. In the next five years,
depreciation is anticipated to decline slightly as operators refrain from opening new mines and spend less
on set-up costs.
Other operating costs, including those for repairs, exploration, maintenance, administrative activities,
marketing and royalties paid to mine owners, consume the remainder of revenue in 2015. Leasing costs are
significant for the industry, making up an estimated 5.3%, as they relate primarily to equipment, such as
excavators and trucks.
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Basis of Competition
Competition is high and steady.
Internal competition
Iron ore is sold on the basis of price, creating a highly competitive landscape despite the low number of
companies in the industry. The mining operations that best compete in this industry are those that have
the lowest costs. The price relevant to the buyer is the delivered price of the iron ore, which includes
shipping costs. In general, the shorter the distance the iron ore must be shipped, the lower the shipping
cost. Hence, iron ore producers that are located close to their major markets have a cost advantage.
Quality is also a competitive factor, with higher-grade lump ores, which are generally easier to handle and
have a high iron content, attracting higher prices. Industry operators also compete for major customers
(e.g. steel producers) based on service and their ability to satisfy short-term or long-term orders. Steel
producers, like the mining industry, seek to benefit from periods of high prices by purchasing ore and
concentrates in advance during times of low prices. Therefore, a mining company's ability to negotiate the
best deals can attain a competitive advantage and achieve greater profit margins. Some companies are also
vertically integrated, operating mines and refineries, thereby supplying directly to downstream markets
and lowering their transaction costs.
Individual producers have an imperative to keep costs down and to seek out the lowest cost operations. If
prices decline, lower cost mines will be more likely to survive. Only mines with costs below the current ore
price stand a chance of servicing debt, covering depreciation charges and earning a profit. While mines can
sustain periods where their cash costs exceed the current ore price, their long-term outlook is usually
bleak.
External competition
Iron ore competes against secondary or reprocessed iron, which is sourced from scrap. As a result, demand
for newly mined ores and concentrates is diminished when secondary producers (recyclers) supply
demand. Similarly, when steel is produced from scrap, inputs such as iron and coal are not necessary. In
addition, iron and steel compete with either less expensive nonmetallic materials or with more expensive
materials that have a performance advantage. Within the downstream motor vehicle industry, for example,
iron and steel compete with lighter materials, such as aluminum and plastics. Alternative steel-making
technologies (such as electric arc furnaces) that compete with blast furnaces are also a source of indirect
competition for the industry.
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Barriers to Entry
Barriers to entry are high and steady.
Barriers to Entry checklist
Level/Impact
Industry Competition
Industry Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation and Policy
Industry Assistance
High
Low
Mature
High
Medium
Heavy
Low
SOURCE: IBISWORLD
There are substantial barriers to entry into the Global Iron Ore Mining industry. These include the capital
expenditures necessary to undertake exploration programs and fund mine development. Prospective
entrants require large amounts of capital (usually several hundred million dollars) to develop or purchase a
new mine. Obtaining the rights to operate at a mine owned by a competitor can also be difficult and require
large royalties. The number of established players who control most of the high production mines in the
world also make it difficult for new entrants, especially if they are small. New players are left to compete by
operating at lower-grade mines or processing facilities, which have higher operating costs. In addition, iron
ore mine development and operation requires access to skilled labor, including geologists, mining
engineers and experienced mine workers.
Other barriers to entry include the difficulty in acquiring permits, licenses and leases. Permits and licenses
are necessary to undertake exploration and, if the mine proceeds, separate permits or licenses are
necessary to mine. Furthermore, legislative procedures, such as supplying comprehensive environmental
impact statements, require significant research and legal costs. Any changes in regulations or laws can halt
or cancel operations, and any environmental contamination at mining properties could result in significant
fines. These issues can affect production, revenue and profit. Operating many mines at once can mitigate
the risk of policy changes, but new entrants do not usually have the high amount of capital necessary to
enter the industry operating multiple locations at once. Companies must also have the expertise to
negotiate favorable contracts with customers. In some countries, foreign companies seeking to establish
operations are required to have a local joint venture partner.
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December 2015
Industry Globalization
The level of globalization is high and increasing.
The Global Iron Ore Mining industry has a high level of globalization. Large companies, such as
Companhia Vale do Rio Doce (known as Vale, formerly CVRD), BHP Billiton and Rio Tinto not only
typically have iron ore mining operations in several regions, but also have substantial global operations in
other mining industries. In addition, trade in iron ore is high and expanding, while international
investment is also growing. China in particular is trying to acquire interests in major iron ore mines in
Australia and other iron ore producing regions.
22
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Major Companies
Major Player
Market
Share
Companhia Vale do Rio Doce
10.4% (2015)
10.3% (2015)
Rio Tinto Group

Other
9.7% (2015)
69.6% (2015)
Companhia Vale do Rio Doce

Market Share: 10.4%
Brazil-based Companhia Vale do Rio Doce (Vale) is the second-largest metals and mining company in the
world, the largest metals and mining company in the Americas and the world's largest producer of iron ore
and iron ore pellets. It is also the world's second-largest producer of nickel and one of the world's largest
producers of manganese ore and ferroalloys. Vale also produces copper, thermal and metallurgical coal,
phosphates, potash, cobalt and platinum group metals.
Vale was created by the Brazilian federal government on June 1, 1942, and was privatized on May 7, 1997,
when the Brazil Consortium, led by the National Steel Company, won a bid held at the Rio de Janeiro Stock
Exchange. The consortium acquired 41.7% of the federal government's common stock in Vale for $3.3
billion.
In 2015, Vale's iron ore and iron ore pellet business segments are expected to account for about 57.2% of
company revenue. Vale operates four regional systems in Brazil for producing and distributing iron ore.
The northern and the southeastern systems are fully integrated and consist of mines, railroads, a maritime
terminal and a port. The southern system consists of three mining sites and two maritime terminals. They
also operate 10 pellet plants in Brazil and two in Oman and have a 50.0% stake in a joint venture that owns
three integrated pellet plants in Brazil and 25.0% stakes in two pellet companies in China. Vale's iron ore
production volume amounted to 332.4 million metric tons in 2014, while pellet production totaled 55.1
million metric tons.
Financial performance
Over the five years to 2015, Vale's iron ore and pellets segment's revenue is forecast to decline 15.5% per
year on average to $14.9 billion. Revenue has tracked iron ore prices, leading to declines in 2012 and gains
in 2013. Price weakness caused a large drop in revenue in 2014, and is anticipated to spill over through
2015. As a result, the company's industry-specific revenue is anticipated to continue declining in 2015.
IBISWorld anticipates the company will continue seeking high quality assets to acquire as small operators
cannot weather weak price environments as successfully as Vale.
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Companhia Vale do Rio Doce (industry-relevant segment) - financial

performance*
Year
Revenue
$ million
Growth
% change
Operating Profit
$ million
Growth
% change
2010
2011
2012
2013
2014
2015
34522.0
45114.0
33251.0
33844.0
24564.0
14879.0
123.2
40.4
-23.7
-1.2
-19.5
-13.5
16242.0
22772.0
6720.0
10901.0
4697.0
1498.0
323.4
38.7
-51.0
23.5
-51.7
-11.3
SOURCE: ANNUAL REPORT
NOTE: *ESTIMATES

Market Share: 10.3%
BHP Billiton is headquartered in both London, United Kingdom and Melbourne, Australia, and is a
multinational mining, oil and gas company. The company is the third-largest supplier of seaborne iron ore
globally, with operations located in Western Australia and Brazil. The company has over 80,000
employees globally, with 7,483 employees involved in iron ore operations.
In Australia, BHP Billiton operates via several joint ventures, in which it holds an 85.0% interest. The
ventures include the Mount Newman joint venture, the Goldsworthy joint venture, the Yandi joint venture
and the Area C joint venture. The other participants in the first three ventures are Japanese groups, while
the Korean steelmaker POSCO has an interest in the Area C joint venture. In Brazil, BHP Billiton operates
via the Samarco Iron Ore joint venture. The other participant in the Samarco joint venture is Companhia
Vale do Rio Doce, the largest iron ore producer in the world.
Over the five years to fiscal 2015-16, iron ore-mining revenue is forecast to decrease to $14.8 billion,
recording a fall of 5.8% per year on average. In fiscal 2015-16, BHP Billiton's industry relevant revenue is
expected to decline by 22.8%, as weak iron ore prices will continue weighing on the company's operations.
Like other large operators in the industry, BHP Billiton has been able to withstand sharp price declines due
to the company's access to high quality and low cost iron ore deposits.
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BHP Billiton Limited (iron ore segment) - financial performance*

Year**
Revenue
$ million
Growth
% change
Operating Profit
$ million
Growth
% change
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
11139.0
20412.0
22601.0
18593.0
21356.0
14753.0
11390.0
N/C
83.2
10.7
-17.7
14.9
-30.9
-22.8
4160.0
10177.0
9019.0
7587.0
8521.0
2866.0
2212.0
N/C
144.6
-11.4
-15.9
12.3
-66.4
-22.8
SOURCE: ANNUAL REPORT AND IBISWORLD

NOTE: *ESTIMATES; **YEAR-END JUNE
Rio Tinto Group

Market Share: 9.7%
Rio Tinto is one of the world's leading mining and exploration companies. It comprises Rio Tinto PLC, a
London-listed public company headquartered in the United Kingdom, and Rio Tinto Limited, which is
listed on the Australian Securities Exchange. The two companies are joined in a dual-listed company
structure as a single entity, called the Rio Tinto Group. In addition to iron ore, Rio Tinto's major products
include aluminum, copper, diamonds, energy products, gold and industrial minerals (e.g. borates, titanium
dioxide, salt and talc).
Rio Tinto's iron ore operations are primarily located in Australia. The company's wholly owned subsidiary,
Hamersley Iron, owns six mines in Australia and operates the Channar mine (60.0% Rio Tinto) and the
Eastern Range mine (54.0% Rio Tinto) in the same country. Rio Tinto's iron ore segment also includes the
Hope Dawns mine (Australia), the Robe River mine (Australia) and a 58.7% interest in the Iron Ore
Company of Canada. In 2009, the company sold its interest in the Corumba mine in Brazil to major
competitor Companhia Vale do Rio Doce.
Rio Tinto's iron ore production amounted to 233.6 million metric tons in 2014. In 2015, IBISWorld expects
production to approach 262.0 million metric tons as the company continues to invest in its existing
projects. Recent production growth has come from expansion at both its Hammersley and Hope Downs
operations, as well as a record production at the Pilbara operations in Australia.
In 2015, Rio Tinto's iron ore operations are projected to generate $14.0 billion in revenue. Since 2010,
revenue has been declining at an annualized rate of 10.2%. Weakening iron ore prices have slashed revenue
in 2014 and 2015, negatively impacting the company's industry-specific revenue over the year. However,
Rio Tinto will likely continue pursuing acquisition opportunities of high quality and low cost deposits from
small operators that have been unable to withstand sharp price declines.
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Rio Tinto Group (iron ore segment) - financial performance*

Year
Revenue
$ million
Growth
% change
Operating Profit
$ million
Growth
% change
2010
2011
2012
2013
2014
2015
24024.0
29909.0
24279.0
25994.0
23281.0
13997.0
N/C
24.5
-18.8
7.1
-10.4
-6.6
8326.0
6936.0
-917.0
3774.0
5542.0
3094.0
N/C
-16.7
N/C
N/C
46.8
-16.0
SOURCE: ANNUAL REPORT AND IBISWORLD

NOTE: *ESTIMATES
Other Players
Fortescue Metals Group
Estimated market share: 4.8%
Formed in 2003, Fortescue has quickly grown to become the fourth-largest iron ore mining company in the
world. The company has two main areas of operation in the Pilbara region of Australia. Fortescue currently
holds reserves of more than 2.2 billion metric tons of hematite ore within the Pilbara region, with a
resource base totaling more than 11.4 billion metric tons. With substantial exploration potential, Fortescue
holds one of the world's major iron ore resources worldwide. In fiscal 2014-15, Fortescue mined 164.1
million tons of iron ore, and was a key supplier to China.
Since its inception, Fortescue has spent or committed nearly $15.0 billion on resource projects in the
Pilbara region. In the first full year of operation (2008), the company's open-access rail infrastructure was
completed, and operations were underway at the Fortescue Herb Elliott Port and at its first mine site,
Cloudbreak. The company subsequently began its Chichester Hub mine operations, which includes the
Christmas Creek mine. Construction was recently competed at Fortescue's new mine in the Solomon Hub
with a rail being constructed to link this operation into the existing rail and port infrastructure system. In
fiscal 2015-16, IBISWorld anticipates Fortescue to generate $6.9 billion in revenue.
ArcelorMittal S.A.
ArcelorMittal is the largest steel producer in the world, with operations in more than 60 countries.
Headquartered in Luxembourg, the company formed in 2006 from the merger of Arcelor and Mittal Steel
Company NV, which had previously acquired US-based International Steel Group in 2005. ArcelorMittal
operates its own iron ore mines in a number of countries (Algeria, Bosnia, Brazil, Canada, Kazakhstan,
Mexico, the Ukraine and the United States). Its own output, together with long-term strategic supply
contracts in South Africa and the United States, provides ArcelorMittal with a hedge against raw material
price increases. In February 2011, ArcelorMittal acquired a 93.0% stake in Baffinland Iron Mines
Corporation, which has reserves on Baffin Island, Canada, and is also developing new mines in Senegal,
Liberia, Mauritania and India. The company's total iron ore shipments reached 77.0 million metric tons in
2014, and is expected to increase marginally in 2015. In 2015, IBISWorld projects the company will
generate $4.3 billion in industry relevant revenue.
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Metalloinvest Management Company LLC

Founded in 2006, Metalloinvest Management Company LLC is a Russian mining and metallurgy company
specializing in the manufacture of steel. Its mining assets include the Lebedinsky Mining and Processing
Integrated Works (Lebedinsky GOK) in Belgorod and Moscow, and the Mikhailovsky Mining and
Processing Integrated Works (Mikhailovsky GOK) in Zheleznogorsk, Kursk Oblast. Each of these mining
operations accounts for about 20.0% of Russia's domestic iron ore market. The company produced 38.7
million tons of iron ore and 22.7 million tons of iron pellets in 2014, with production expected to increase
slightly in 2015, which IBISWorld expects Metalloinvest's iron ore and pellet operations to generate $3.5
billion in 2015.
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Operating Conditions
Capital Intensity
The level of capital intensity is high.
The industry requires large inputs of land and equipment
Growing mine size is contributing to capital intensity
The Global Iron Ore Mining industry is highly capital intensive, as substantial amounts of capital are
invested in heavy equipment necessary for mining activities. IBISWorld estimates that for every dollar
spent on labor, companies allocate $0.80 per year on capital investments. This level of capital intensity is
considered high relative to other industries in the overall world economy.
High capital intensity arises from the nature of the mining process, which requires significant investment
in large-scale earth moving and processing equipment such as electric shovels and conveyors. The industry
also has a substantial working capital requirement because firms require sufficient capital to survive
during periods of low prices, when revenue may temporarily be insufficient to cover costs.
In addition, although the industry is a large employer, employment is expanding at a much slower rate
than output. As the industry shifts toward more capital intensive types of production, such as larger-scale
open cut mining, labor productivity will increase. While growth in output per worker will constrain future
increases in employment, it will also be associated with higher wages per worker. The total wage bill faced
by the industry is expected to continue rising. At the same time, the ongoing investment associated with
new mines and mine expansions will ensure that depreciation expenses also increase. Depreciation charges
will expand more rapidly than the industry's wages.
Technology & Systems

The level of technology change is medium.
Iron ore is mined using fairly straightforward methods. Overburden (soil overlaying the deposit) is
removed using heavy earth moving equipment. The iron ore is then extracted, again using earth moving
machinery. Subsequently, the ore may be crushed to size, if required. Oftentimes, ore from several pits is
blended to meet customer specifications. The resulting product is then railed to the port for shipment.
Iron ore pelletizing involves mixing iron ore fines or crushed iron ore with bentonite (a type of clay) to
form small balls. These are then baked to yield pellets that are about the size of marbles. The fuel used to
bake the pellets represents a major cost in iron ore pelletizing. Pellets typically have an iron content of
about 65.0%. Most iron ore pellets are loaded onto railcars and transported to ports, from which they are
shipped to both steel mills throughout the country as well as export markets.
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Revenue Volatility
Industry revenue volatility is very high.
The Global Iron Ore Mining industry's performance is characterized by a very high level of revenue
volatility, as wildly fluctuating iron and steel prices have a profound effect on revenue and profit.
Metal prices are determined on global markets and reflect the dynamic nature of the supply-and-demand
balance, rising sharply in response to demand surges or supply weakness and falling just as quickly if
oversupply emerges or demand drops. Additionally, yearly shifts in output occur, reflecting variations in
mining conditions, decisions to halt mine operations, and cost and price movements. Price fluctuations
have an equally volatile effect on industry profit because per unit mining costs display relatively stable
change.
Over the past five years, the world price of iron ore has been extremely volatile. Price volatility was not
typical of the metal before 2004, but the industrialization of China and India have overwhelmed most
other influences on iron ore prices since that year. The global economic downturn sent prices crashing, but
the momentum of the Chinese economy combined with stimulus measures employed by the country
continued to spur demand for infrastructure and manufacturing. As a result, prices rebounded quickly and
created a highly profitable environment for miners. Industry revenue grew a record 101.9% in 2010 after
having fallen 48.2% the previous year, highlighting the strong relationship of market prices and industry
performance. In 2014 and 2015, the Chinese construction sector slowed down significantly, causing the
price of iron ore to crash. Accordingly, industry revenue has contracted significantly in these years.
Regulation & Policy

The level of regulation is heavy and the trend is steady.
Iron ore mining is highly regulated worldwide. In general, state and local authorities may tax the value of
iron ore mining firms' landholdings (property taxes), their revenue (gross receipts taxes), purchases of
materials and services (sales and use taxes), and a range of other items that vary according to the particular
taxing authority. In many countries, iron ore mining firms are also responsible for remitting some federal
taxes (mainly federal income tax and employees' share of Social Security taxes) on behalf of their
employees. These do not form part of the firm's own tax costs. In addition, most countries impose royalties
on iron ore mining.
Brazil
In Brazil, the federal government is responsible for legislating on deposits, mines, or mineral resources and
metallurgy. Mineral resources, including those in the subsoil, are property of the federal government.
Exploration and exploitation of mineral resources may be undertaken after authorization is gained from
the federal government. According to the Constitution, such activity must be undertaken in the national
interest by a Brazilian company or by a company incorporated under Brazilian law and which has its main
office and administration in Brazil. There are also restrictions on undertaking mining near borders and in
areas reserved for indigenous peoples.
The states, federal district, municipalities and the federal government are assured a share of exploited
mineral resources in their respective territory, continental shelf, territorial waters or exclusive economic
zone, or a financial compensation for mineral extraction. The landowner is also ensured a share in the
mining results.
Authorization to explore for mineral resources is for a limited period, while mining concessions are for an
unlimited period. Exploration and mining concession rights may not be assigned or transferred, wholly or
partially, without prior consent by the federal government. Small mining cooperatives organized to
perform a mining activity have priority in small-scale mining of reserves and deposits in the areas where
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30
they operate. Anyone who exploits mineral resources is obliged to rehabilitate the degraded environment,
as required by a competent public authority.
The federal government charges a royalty of 2.0% on the sales net revenue of iron ore. Sales net revenue is
sales revenue less taxes, freight and insurance.
Australia
In Australia, state governments determine what land is open to exploration and mining, issue exploration
and mining leases and collect royalties from producers. Iron ore miners are also open to native title claims
under the Native Title Act 1993, commonly known as the Mabo legislation.
Once iron ore mines are operational, firms are subject to environmental laws and regulations dealing with
noise, air emissions, and with the use, handling and disposal of hazardous materials and waste. Industry
firms are also required to comply with federal and state government occupational health and safety
regulations, acts and other mandatory requirements for employees, contractors and visitors.
In Australia, iron ore producers are required to pay royalties based on the volume or value of mine
production to the relevant state government. The royalties charged by the Western Australian State
Government vary according to the type and use of the iron ore mined. Lump iron ore attracts a royalty of
7.5% realized value (defined as either the free on board export value, or in the case of domestic sales, the
sales value less any transport costs incurred), while iron ore fines attract a royalty rate of 5.63%. The
royalty applicable to iron ore used in a beneficiation process is 5.0%. In South Australia, a royalty of $1.1
per metric ton is payable on iron ore extracted.
For the most part, iron ore producers are not required to collect goods and services tax (GST) and remit it
to the federal government, because it is not levied on exports. Domestic sales, which form a small part of
the total, do attract the GST. All producers are able to claim input tax credits.
In 2012, the Australian Parliament passed the Mineral Resource Rent Tax Bill 2012 (Act), introducing the
Australian Mineral Resource Rent Tax (MRRT) on iron ore and coal. Key elements include: a headline tax
rate of 30.0% imposed on profit after a return equal to the long-term government bond rate has been
achieved, plus 7.0%; credits for state royalty payments; allowing existing projects to use market value or
book value in writing off the capital base; exemptions for small projects with resource profit of less than
$50 million per year; the immediate write off of investments made after July 1, 2012, for the purposes of
the MRRT; and a 25.0% extraction allowance, which reduces the effective MRRT rate to 22.5% and is
intended to recognize the contribution made by the miner.
China
In November 2007, China's Ministry of Commerce and its National Development and Reform Commission
announced that China planned to bar foreign companies from investing or exploring in major
nonrenewable mineral resources. Under a new set of regulations, foreign firms will also be restricted or
forbidden to invest in other projects that emit high amounts of pollution or consume excessive amounts of
energy.
In China, royalties payable on mining amount to 2.0% of gross revenue, plus an additional royalty payable
to local governments of 0.5% to 1.0% of gross revenue.
India
In India, the Department of Mines is responsible for the survey and exploration of all minerals (other than
natural gas and petroleum), as well as for mining. Foreign equity investment in mining joint ventures is
normally limited to 50.0%; however, this limitation does not apply to the captive mines associated with a
mineral processing facility.
Mining companies pay a royalty rate of four to 27 rupees per metric ton of iron ore mined, depending on
the ore grade. In November 2007, a study group on royalties constituted by the Ministry of Mines
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December 2015
31
recommended shifting to ad valorem basis for royalty calculations and also suggested imposing different
royalty rates for different minerals. The study group suggested imposing a royalty rate of 10.0% of sales
value for iron ore.
The Indian Government imposed an export tax amounting to 300 rupees per ton of iron ore (about
US$6.80 per ton) from March 1, 2007. The aim of the tax is to curb exports to ensure there is sufficient
local iron ore to meet demand from steel producers operating in India. The steel producers ArcelorMittal
and POSCO have announced plans to spend US$21 billion on steel plants in India. After protests from iron
ore miners in India, the Indian government cut the export tax on low-grade iron ore (ore with an iron
content of less than 62.0%) to 50 rupees per ton.
United States
The US Iron Ore Mining industry is highly regulated. The General Mining Act of 1872, as amended, is a
federal law that authorizes and governs prospecting and mining for economic minerals, including copper,
lead and zinc, on federal public lands. The General Mining Law allows for the enactment of state laws
governing the location and recording of mining claims and sites that are consistent with federal law.
Federal land is open to mining claims in 19 states: Alaska, Alabama, Arizona, Arkansas, California,
Colorado, Florida, Idaho, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon,
South Dakota, Utah, Washington and Wyoming. The Bureau of Land Management (BLM) manages the
surface of public lands in these states and the Forest Service manages the surface of National Forest
System lands. The BLM is responsible for the subsurface minerals on both its public lands and National
Forest System lands. Claims may not be located in areas closed to mineral entry; these areas are withdrawn
from further location of mining claims or sites. Such areas include National Parks, National Monuments,
American Indian reservations, most reclamation projects, military reservations, scientific testing areas,
most wildlife protections areas (e.g. federal wildlife refuges) and lands withdrawn from mineral entry for
other reasons.
Firms are also required to comply with Environmental Protection Agency (EPA) regulations relating to air
and water pollution. Because of increasing public environmental concerns, laws and regulations are
becoming more restrictive. In response to this, producers are investing in new, more environmentally
friendly technologies which require less energy and produce less waste. More specifically, under Section
112 of the Clean Air Act, the EPA is developing national emission standards for hazardous air pollutants for
the taconite processing source category. Taconite processing involves separating and concentrating iron
ore as well as creating and indurating (hardening) pellets. To better control emissions of hazardous air
pollutants during these processes, EPA expects that additional emission control equipment will be installed
for indurating furnaces and other part of the operation, such as onsite crushing and handling and pellet
handling. The costs of complying with the rule will total about $57 million per establishment. The controls
will increase the cost of producing taconite pellets and the iron and steel made from those pellets.
Mining companies are subject to a high risk of environmental liability and most companies record an
accrual for environmental remediation liabilities associated with particular mining operations based on the
probability of liability being incurred. The mining companies are expected to regularly monitor their
operations, procedures, and policies for compliance with existing regulations. Despite producers'
willingness to comply with government policies, any changes in regulations or laws can halt or cancel
operations, and any environmental contamination at mining properties could result in significant fines.
These issues can affect production, revenue and profit.
Russia
In Russia, the Ministry of Natural Resources (MNR) regulates the mining industry, including iron ore
mining. The Federal Agency for Subsoil Use, which operates under the supervision of the MNR, governs
subsoil licensing. An exploration license is awarded for five years, a production license for 20 years and a
combined license for 25 years.
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December 2015
32
In Russia, the government charges a royalty amounting to 6.0% of gross revenue on all mining operations.
The primary Russian legislation related to activities associated with mining include federal law on subsoil.
The Federal Law On Subsoil dated 21 February 1992 (the Subsoil Law) and various ministerial orders
and regulations issued pursuant, regulate the licensing regime with respect to exploration and production
of mineral resources.
Industry Assistance
The level of industry assistance is low and the trend of industry assistance is steady.
There are no specific tariffs for this industry.
In general, countries impose either no or very low tariffs on iron ore imports, primarily to assist the
competitiveness of their steel producers. For example, China, the world's largest importer of iron ore, does
not apply tariffs to iron ore. Nevertheless, iron ore miners in some countries receive considerable level of
government assistance.
Brazil
Assistance to iron ore mines in Brazil primarily takes the form of discretionary waivers on imports of
equipment used by the iron ore industry. Currently, the tariff on equipment imports is about 17.0%.
Australia
Australia's iron ore mining industry is not protected by tariffs and does not receive any nontariff import
protection. However, industry operators do have access to the federal government's fuel tax credit scheme,
which became effective on July 1, 2006, replacing the previous Energy Grants Credits Scheme (operational
from fiscal year 2003 to fiscal year 2005). Under the fuel tax credits system, eligible users, including those
engaged in mining operations and associated heavy freight haulage, claim credits for the tax component of
their fuel costs on their business activity statements.
United States
The US iron ore mining industry is not protected by tariffs and does not receive any non-tariff import
protection. The federal government provides assistance to the industry in the form of infrastructure
provision. In 2002, Congress approved an appropriations bill that provided for the construction of a new
lock at the Soo Locks in Michigan. However, funding from the Great Lakes states stalled, putting the
project on hold until construction of the first phase began in 2009. The Soo Locks connect Lake Superior to
the lower four Great Lakes. The locks allow for the shipment of iron ore from mines in Minnesota and
Michigan, coal from western states, and grain from American and Canadian farms. The project's two
phases are estimated to be completed within the next ten years; however, funding requests are ongoing.
China
China does not impose tariffs on imports of iron ore, but generally applies import licensing controls to iron
ore and also requires compulsory examination of iron ore imports. Also, the government encourages
domestic iron and steel manufacturers to directly acquire foreign iron ore mines. Therefore, the level of
industry assistance is minimal and is declining.
India
In India, public-sector enterprises, such as the National Mineral Development Corporation, Kudremukh
Iron Ore Company, Steel Authority of India Limited and Orissa Mining Corporation, dominate the iron ore
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December 2015
33
sector. More recently, there had been discussions of lowering the existing iron ore tariffs from about 30.0%
to 20.0% to boost export volumes.
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34
December 2015
Key Statistics
Industry Data
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Revenue
($m)
IVA
($m)
112,395.4
214,719.8
285,554.1
147,949.3
298,754.7
362,339.9
282,767.5
312,536.0
223,559.0
143,730.9
147,330.3
150,405.0
151,764.9
154,768.5
157,968.1
43,505.6
75,405.3
101,050.4
59,486.4
163,414.1
166,722.7
103,970.6
142,402.5
89,906.7
58,993.2
59,041.0
62,635.6
62,127.3
63,280.2
65,021.5
Establishments
Enterprises
(Units)
(Units)
7,227
7,446
7,672
6,960
7,726
6,416
6,931
6,794
6,890
6,297
6,391
6,460
6,453
6,516
6,585
4,899
5,071
6,951
6,432
7,191
5,897
6,353
6,180
6,229
5,661
5,709
5,736
5,696
5,716
5,742
Employment
(Units)
Exports
($m)
Imports
($m)
Wages
($m)
World Price
of Iron Ore
($US Per
Tonne)
909,573
882,059
1,109,640
961,045
1,039,968
925,114
1,003,963
992,360
1,011,954
934,055
957,446
977,428
986,265
1,005,785
1,026,578
64,667.7
121,571.5
162,582.3
86,417.2
181,702.2
209,235.9
166,187.3
190,745.8
147,309.4
98,997.7
104,240.4
109,114.8
111,897.5
115,422.7
118,852.7
64,667.7
121,571.5
162,582.3
86,417.2
181,702.2
209,235.9
166,187.3
190,745.8
147,309.4
98,997.7
104,240.4
109,114.8
111,897.5
115,422.7
118,852.7
9,010.4
9,505.9
13,411.3
14,079.5
17,071.5
13,809.1
16,852.4
18,209.7
18,041.1
16,652.2
17,191.9
17,509.3
17,677.1
18,037.7
18,408.1
69.3
123.0
156.0
80.0
145.9
167.8
128.5
135.4
96.9
55.4
57.4
59.4
60.4
62.4
64.5
Employment
(%)
Exports
(%)
Imports
(%)
Wages
(%)
World Price
of Iron Ore
(%)
-3.0
25.8
-13.4
8.2
-11.0
8.5
-1.2
2.0
-7.7
2.5
2.1
0.9
2.0
2.1
88.0
33.7
-46.8
110.3
15.2
-20.6
14.8
-22.8
-32.8
5.3
4.7
2.6
3.2
3.0
88.0
33.7
-46.8
110.3
15.2
-20.6
14.8
-22.8
-32.8
5.3
4.7
2.6
3.2
3.0
5.5
41.1
5.0
21.3
-19.1
22.0
8.1
-0.9
-7.7
3.2
1.8
1.0
2.0
2.1
77.5
26.8
-48.7
82.4
15.0
-23.4
5.4
-28.4
-42.8
3.6
3.5
1.7
3.3
3.4
Annual Change
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Revenue
(%)
IVA
(%)
91.0
33.0
-48.2
101.9
21.3
-22.0
10.5
-28.5
-35.7
2.5
2.1
0.9
2.0
2.1
73.3
34.0
-41.1
174.7
2.0
-37.6
37.0
-36.9
-34.4
0.1
6.1
-0.8
1.9
2.8
Establishments
Enterprises
(%)
(%)
3.0
3.0
-9.3
11.0
-17.0
8.0
-2.0
1.4
-8.6
1.5
1.1
-0.1
1.0
1.1
3.5
37.1
-7.5
11.8
-18.0
7.7
-2.7
0.8
-9.1
0.8
0.5
-0.7
0.4
0.5
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December 2015
35
Key Ratios
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
IVA/revenue
(%)
Imports/
demand
(%)
Exports/
revenue
(%)
Revenue per
employee
($'000)
Wages/
revenue
(%)
Employees
per est.
Average
wage
($)
38.7
35.1
35.4
40.2
54.7
46.0
36.8
45.6
40.2
41.0
40.1
41.6
40.9
40.9
41.2
57.5
56.6
56.9
58.4
60.8
57.7
58.8
61.0
65.9
68.9
70.8
72.5
73.7
74.6
75.2
57.5
56.6
56.9
58.4
60.8
57.7
58.8
61.0
65.9
68.9
70.8
72.5
73.7
74.6
75.2
123.6
243.4
257.3
154.0
287.3
391.7
281.7
314.9
220.9
153.9
153.9
153.9
153.9
153.9
153.9
8.0
4.4
4.7
9.5
5.7
3.8
6.0
5.8
8.1
11.6
11.7
11.6
11.6
11.7
11.7
126
118
145
138
135
144
145
146
147
148
150
151
153
154
156
9,906.2
10,776.9
12,086.2
14,650.2
16,415.4
14,926.8
16,785.9
18,349.9
17,828.1
17,827.9
17,956.0
17,913.6
17,923.3
17,934.0
17,931.5
Figures are inflation-adjusted 2015 dollars

NOTE: UNLESS SPECIFIED, AN ASTERISK (*) ASSOCIATED WITH
A NUMBER IN A TABLE INDICATES AN IBISWORLD ESTIMATE AND
REFERENCES TO DOLLARS ARE TO US DOLLARS.
Jargon
FINES A finely crushed or powdered ore.
HEMATITE A red-colored form of iron ore that occurs in crystalline, massive or granular forms and
typically contains at least 70.0% iron.
IRON ORE Rocks or deposits containing compounds from which iron can be extracted.
IRON ORE PELLET Marble-size balls of an iron ore and clay mixture, baked in a large furnace.
MAGNETITE A natural black oxide of iron, typically containing 65.0% to 72.0% iron.
OPEN CUT MINING A type of surface excavation in the form of an inverted cone; the shape of the mine
opening varies with the shape of the mineral deposit.
TACONITE An iron-bearing, high-silica, flint-like rock, typically containing 20.0% to 30.0% iron.
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December 2015
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CONTENTS

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IBISWorld Industry Report

Global Iron Ore Mining

About This Industry ................................. 2

Industry Performance .............................. 3

Products & Markets ................................. 9

Competitive Landscape ........................... 17

Cost Structure Benchmarks ......................... 18

Major Companies .................................... 23

Operating Conditions .............................. 28

Key Statistics ........................................... 34

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Global Iron Ore Mining

About This Industry

Global Iron Ore Mining

Key External Drivers

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

Industry Life Cycle

Global Iron Ore Mining

Products & Markets

Global Iron Ore Mining

Products & Services

Iron ore lump

Iron ore pellet feed

Iron ore pellets

Global Iron Ore Mining

Steel manufacturers - rest of the world

Iron ore processors

Other industrial markets

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

India & Central Asia

Africa & Middle East

South East Asia

Global Iron Ore Mining

Global Iron Ore Mining

Key Success Factors

Global Iron Ore Mining

Cost Structure Benchmarks

Rent & Utilities

Global Iron Ore Mining

Global Iron Ore Mining

Global Iron Ore Mining

Barriers to Entry checklist

Global Iron Ore Mining

Global Iron Ore Mining

Companhia Vale do Rio Doce

BHP Billiton Limited

Rio Tinto Group

Companhia Vale do Rio Doce