An increasing dependence on iron-ore imports by China would present substantial opportunity for the intensified development of African iron-ore projects, the MSA Group geology operations manager Brendan Clarke said at the Geological Society of South Africa’s GeoForum conference last week.

China’s iron-ore import ratio was set to rise from 70% of total consumption to 85%, as local grades declined and the costs associated with the mining and beneficiation of lower-grade ores increased.

While the Chinese government was a significant producer, Clarke believed that domestic producers offered an expensive, yet low-quality product. As a result, the country was the world’s largest importer of iron-ore, bringing in 58% of total production in 2012.

The bulk of these imports were from the Pilbara region of Australia, accounting for 45% of imports. South Africa accounted for 6% of the iron-ore China sourced from outside the country in 2012.

“Aside from projects in South Africa, there is very little production elsewhere on the continent, as the mega projects, such as Tonkolili, in Sierra Leone, Simandou, in Guinea, and Mbalam, in Cameroon, struggle to get over the line,” Clarke commented.

He cautioned, however, that the existing Chinese ‘credit crunch’ and economic slowdown would have a detrimental knock-on effect on iron-ore prices. In addition, new projects faced a plethora of challenges, most notably rising production costs.

“Much like most other mining sectors, the iron-ore industry faces increasing regulatory burdens, the threat of resource nationalism, including ‘supertaxes’, a scarcity of skilled labour, and degrading ore reserve quality,” Clarke said.

With long-term forecasts outlining a fall in iron prices to below $100/t, Clarke believed that, at these prices, many producers would be unable to realise the required margin, and would thus need to transition towards becoming a low-cost producer.

“On the upside, in theory, African projects are well placed to deliver in this lowest quartile,” he said.

Clarke believed that, for Africa to exploit the solid iron-ore demand, there would need to be a shift from direct-shipping-ore projects towards lower-grade projects closer to infrastructure.

“The lower-grade projects will offer incrementally lower costs, and will allow the beneficiation of the lower-grade material into volumetrically smaller, higher-value concentrate. “This is in comparison with the massive infrastructure costs associated with bringing stranded projects to market,” he commented.

Clarke added that the wealth shift from the developed to the emerging economies would result in ongoing urbanisation, which should provide sufficient impetus to sustain iron-ore markets.

“In addition, steel demand is likely to remain positive for between 20 to 30 years, driven by a likely shift in usage patterns from property to industry and fabrication,” he noted.