Iron Ore

Market Overview

• Global market size – 2,490 MMT (2019)
• Expected to grow moderate growth due to the slowdown in 2020 on account of coronavirus to 2,522 MMT by 2022.

Market Drivers

• Downstream demand
• Steel production output

Porter’s Five Forces Analysis

Supplier Power

• Supplier power is medium to high, as the currently supply disruptions across the globe has strengthened the supplier power
• Increased use of ferrous scrap moving forward for reduction in pollution levels, especially in China will put a damper on the supplier power in the near future

Barriers to new entrants

• Barriers to new entrants in the iron ore market are high. Large investments and capital is required to establish a new mine.
• Furthermore, the iron ore industry is heavily regulated by the government and getting permits to being operations is a daunting task
• Negotiating rail and port access with established miners

Intensity of rivalry

• Intensity of rivalry is medium, due to consolidation in the industry amongst the major players. There is high investment cost for entry, regulations, and high exit barriers.
• The struggle for market share and increased profitability is reflected in price competition where large scale operations benefit

Threat of substitutes

• Threat of substitutes is low, as ability to alter the properties to suit the end-use industry by different process is already prevalent in the market and metals produced through iron ore have the capability of being recycled. Although the usage of aluminum, plastics, composites has been rising continuously in the automobile and consumer durables sectors, it still does not pose any significant threat since using them would require substantial retooling and switching costs.

Buyer power 

• Buyer power is medium to high, depending on the end-use industry, as the level of demand varies across the industries
• For instance, the current steel industry downturn and the weak commodity market provide added advantage to the buyers, in terms of price negotiation.