Weakening global demand is providing some small advantage in that it is relieving supply tensions and removing shortages of skilled labour, goods and services within the industry. Combined with declines in energy costs, the industry is now faced with a reduction in production costs for the first time for many years. Average world iron ore cash costs had been rising systematically in recent years.

The average FOB cash cost of international non-agglomerated iron ore production covered by this report has increased by over 82% between 2003 and 2007, with an estimated 24% increase over 2008.

China is the key driver of the global iron ore industry, and will remain this way for the foreseeable future.

• Changes in Chinese steel production hold the greatest influence over world iron ore trade, as the appetite for high quality ore will be satisfied by imports.
• Despite a surge in domestic mine output, which has jumped by over 16.7% CAGR from 2000 to 2008 on a run-of-mine basis, China remains the dominant buyer.
• Chinese iron ore demand is primarily driven by GDP growth, which considerably exceeds Western World growth rates, rapid industrialization and urbanization on a huge scale.

Freight rates are a key component of the profitability of iron ore operations this year. Freight rates collapsed at the end of 2008, to levels below the cost of operating ships in some cases. A mild recovery is occurring, but not to the levels seen in 2007/2008. Freight cost increases will tend to benefit Australian iron ore producers exporting to Asia, while iron ore producers in the Americas will have a CIF cost advantage servicing the European market.

Our Iron Ore Mine Cost Report covers operational data over a 10-year time span, representing the majority of production for the seaborne trade. This multi-volume analysis estimates production costs in 16 countries, including many of the major facilities around the world. Detailed cost estimates, covering the production process from raw materials to either concentrate or delivered ore are provided.

Iron Ore Mining Cost Breakdown