Industry Trend Analysis - Chinese Hunger To Feed Africa's Iron Ore Sector - 10 JULY 2017

BMI View: Iron ore production in Sub-Saharan Africa will continue to edge up from 93.0mnt in 2017 to 103.0mnt in 2021 as continued Chinese investment into the region offsets the effects of lower global prices, although unfavourable regulations pose risks to our outlook . West-African producers Guinea, Liberia and Sierra Leone will be growth outperformers, while traditionally larger markets such as South Africa and Mauritania will struggle.

The iron ore sector in Sub-Saharan Africa will be supported by an increase in Chinese-owned mining projects aimed at tackling the Asian giant's structural deficit in iron ore. A significant proportion of these investments will provide a much needed boost to smaller markets, which will make up for muted growth in major producer South Africa, as well as lower iron ore prices globally. We forecast iron ore production growth to average 4.7% across iron-ore producing countries in Sub-Saharan Africa over 2017-2021, outperforming other major producers such as Australia, Russia or China during the same period.

As part of China's long-term strategic vision for securing a consistent supply of ores, we will witness a growing influx of investors from the Asian country into iron ore projects in Africa in the coming years. We expect Chinese miners to be particularly spurred by strong government backing, providing them with a higher risk tolerance than western miners who will continue to struggle with high debt loads and costs. We expect Sierra Leone, Liberia and Guinea to be the largest benefactors of this capital inflow based on existing or announced Chinese investments regardless of the negative outlook on iron ore prices, which we forecast to drop from USD65/tonne in 2017 down to USD44/tonne in 2021.

SSA To Perform Solidly
Select Countries - Iron Ore Production Growth, 2017-2021f (annual % change)
f = BMI forecast. Source: BMI Research

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