Industry Forecast - Iron Ore: Steady Production Growth Ahead - APR 2018

BMI View: Kazakhstan will see steady iron ore production growth as key low-cost mines ramp up output over the coming years. Strengthening trade links between the Kazakh and Chinese governments is likely to provide local miners with further capital to fund expansion, which will support moderate growth in production to 2027.

Latest Developments

  • Kazakhstan's iron ore sector will see steady production growth, supported by low operating costs and foreign investment. We forecast the country's iron ore output to increase from 38.7mnt in 2018 to 51.5mnt by 2027, averaging 3.4% annual growth. This is a slight slowdown compared to the average growth rate of 4.7% over the previous ten-year period, reflecting more subdued iron ore prices.
  • In December 2017, Eurasian Resources Group (ERG), the dominant foreign miner in Kazakhstan, announced the launch of the USD10mn 'smart mine' project at the Kacharsky iron ore mine, which will use monitoring and artificial intelligence (AI) to integrate the iron ore production. The firm previously announced the construction of a facility at the Aksu ferroalloys plant with a production capacity of up to 130kt annually and a closed-loop water system and internal sludge filtration to reduce pollution.
  • In June 2017, Norinco International Cooperation Ltd. took charge of the design procurement and construction work for the Kokbulak Iron Ore Concentrator in Shalkar, Kazakhstan, with a preliminary contract valued at USD710mn. The company signed a joint venture agreement with Kazakhstan's Aktobe Steel Production conferring on the former the iron ore mining rights, with an expected contract duration of 36 months. The plan envisages the scale of the concentrator to allow annual processing of 1.3bnt of iron ore.
  • We maintain our long-term view Kazakhstan will continue to be an important global producer of iron ore and a key supplier to the Chinese market. In September 2015, ERG announced it had about USD2.0bn financing from the China Development Bank to fund the development of aluminium and iron ore mining projects in Kazakhstan, among other developments. The agreement is part of the One Belt-One Road initiative that seeks to strengthen trade links between China and Central Asian states.

Structural Trends

ERG To Drive Growth

Kazakhstan's iron ore sector will remain consolidated with only a couple of firms accounting for the vast majority of investment and production of the key steelmaking ingredient. Eurasian Resources Group (ERG) , following its acquisition of Eurasian Natural Resources Corporation, is the largest producer, responsible for nearly three-quarters of the country's total output. The Kazakhstan government used to control a large share of the company before it was acquired by the ERG in 2013.

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