By Kunal Bose
Africa has already served the notice. From now on the world will be seeing the rise of this continent, the repository of resources from iron ore to bauxite to oil in most cases of yet to be discovered quantity but of their high quality established, as a significant producer-exporter of the basic raw material from which steel is made. The emergence of Africa as a major exporter of iron ore, signalled by the progressive commissioning of Simandou mines in Guinea in West Africa will usher in structural changes in seaborne trade in the mineral by way of shifts in global trade flows.
This besides, growing supplies from Simandou mines and also expected mines development in Gabon, Congo and Algeria, all sitting on rich iron ore deposits, will deepen competition for incumbent exporters. Maybe, with exports from Simandou rising, mines elsewhere perched on high points of cost curve will find it difficult to stay in business.
Several factors but specially, the compulsion to harness economic opportunities and revenues for the exchequer and build infrastructure have led the African countries to first map natural resources lying under the earth and then start developing mines almost in all cases in collaboration with foreign investors and technology owners. While Anglo-Australian and Australian mining giants such as Rio Tinto, Glencore and Fortescue are participating in African iron ore mines development, China expectedly has the biggest role in creating the infrastructure and opening and operating mines in that continent.
By the time the West, particularly the US, realised what China was up to in Africa, Beijing has consolidated its position in a number of chosen African countries. Its Belt & Road Initiative (BRI) launched by President Xi Jinping in 2013 has a major attraction for African leaders, for in it is found promise of investment in infrastructure and mines development.
Being the world’s by far the largest producer of steel and aluminium but not well endowed with essential raw materials iron ore and bauxite, China has remained the biggest client of seaborne trade in the two minerals. Beijing realised it early that its bargaining power vis-a-vis global mining giants will improve if iron ore and bauxite, mostly of very high quality, start flowing from Africa in large quantities. Even while China has a dominant share of 70 percent of the global seaborne market for iron ore, the country’s steelmakers will from time to time get into a slugfest with principal producers of the mineral over prices.
The latest such dispute happened in September 2025 when the state-backed China Mineral Resources Group (CMRG) told the country’s steel companies to stop or limit purchases of specific BHP products like Jimblebar fines and Jinbao. The dispute was over total reliance on dollar-based Western benchmarks for ore price determination. For as long as it could resist conceding the Chinese demand for yuan-based pricing, the stalemate continued.
But in April last after having suffered an earning loss of an estimated $300m over two quarters due to forced price discounts on ‘restricted ores,’ the standoff ended with the miner agreeing to use a Chinese ore price index for a 26% weighting in BHP’s long-term supply contract to run through 2027 fiscal. The agreement is seen as a win-win situation for both BHP and CMRG, for while trade will be largely denominated in US dollar, Chinese yuan has finally made a breakthrough in iron ore trade. Trade officials believe the share of yuan in iron ore trade can only rise in future with China certain to flex its muscle, born out of its share of up to 75% in seaborne ore trade in some years. In any case, China’s bargaining power will be further strengthened with rising superior grade iron ore flows from Africa.
When the world’s biggest miner BHP makes a concession to China, can the other important mining groups not fall in line? Rio Tinto and Fortescue have too made changes to their benchmark structures yielding to pressure from CMRG. The former will not deny tensions prevailing between buyers (read mostly Chinese) and sellers, but it pursues long-term ties in its own way and that creates win-win opportunities for all the parties.
In both the Simandou projects, Chinese groups are stakeholders of significance. Baowu Steel Group of China is part owner of Simandou North project while Aluminium Corporation of China is partnering Rio Tinto and government of Guinea to develop the south block. While iron ore in growing quantities have started flowing from Simandou for exports, regrettably the project suffered over a two-decade delay, particularly for political instability, ownership dispute, corruption charges against politicians and bureaucrats and acute infrastructure deficiencies. Thankfully, the major issues delaying project execution have been solved, except for sufficiently strengthening the rail and port infrastructure to handle the peak export potential of Simndou of 120m tonnes likely to be achieved by 2030.
Following the commissioning of mines, rail and port infrastructure in November last year, mine production is being progressively ramped up raising hopes of Simandou exports exceeding 20m tonnes this year. Ahead of the start of the rainy season in July, average daily shipments of Simandou ore were around 70,000 tonnes, which were ahead of the most generous expectations. But intense rains that last up to September end could affect shipments through the monsoon.
Whatever the rains related uncertainty and any adverse political developments in the military ruled country, strengthening of rail infrastructure of 650 km heavy haulage railway and commissioning of a new terminal of 40m tonne capacity at Morebiah port will protect exports. Two more terminals of identical capacity will be built to facilitate annual exports of 120m tonnes by 2030.
Trade officials say the African challenge to the Australia-Brazil dominance of iron ore seaborne trade valued at over $150bn will grow as reports of new projects in implementation stages from a number of countries in that continent continue to emerge. The challenge that all the major iron ore bearing African nations from Gabon to Democratic Republic of Congo (DRC) to Republic of Congo (RoC) to Algeria is contending with is to build a strong rail and port infrastructure for shipment of ore to the world market. Arguably, the most promising iron ore project outside Guinea is MIFOR in DRC to claim an investment of $28.9bn in mines development, ore processing, infrastructure and logistics.
“A very challenging venture because of the deposit location in the remote north lacking in infrastructure. But then the deposit is an estimated 20bn tonnes and the average fe content of ore is 60%. Huge commercial opportunities the project holds, besides job opportunities of different skills that it will create,” says an official of Federation of Indian Mineral Industries (FIMI). The DRC mines ministry is targeting annual production of 50m tonnes in initial stages to be stepped up to 300m tonnes finally. The DRC regime in its bid to expand the mining industry beyond copper and cobalt is expected to aggressively pursue the MIFOR iron ore project.
The other major projects in that continent include Belinga (1bn tonne resources with average fe content of 60%), Baniaka (758m tonne resources) and Milingui (estimated resources range from 500m to 1bn tonnes), all in Gabon; Zanaga (7bn tonne resources with fe content a very high 66%) and Mayoko (resources estimated at hundreds of million tonnes with fairly high fe content) in RoC; and Gara Djebilet (estimated resources 3.5bn tonnes with fe content ranging from 57% to 58.5%) in Algeria.
Incidentally, supplies from Simandou and hopefully from other mines in Africa, now at different stages of development are happening when steelmakers in China, India and Europe are under pressure to bring down greenhouse gas emissions through increasingly stricter carbon management. This being the case, the global steel industry will need more of high grades of ore as blast furnace (BF) feedstock. The better the ore the requirement of coking coal and coke in BF will be less and therefore, lower emissions.
Mills exporting steel products to the European Union, will have the benefit of lower carbon border adjustment mechanism (CBAM) cost if emissions levels are brought down by using high grades of ore. At the same time, free carbon allowances in the EU will be down to zero, meaning mill operating costs will go up by some notches, unless of course the mills seek remedy by using only high-quality iron ore.
Producers of direct reduced iron (DRI) will also be keen buyers of premium ore to originate in Simandou or Carajas of Brazil. Similarly, as hydrogen-based steelmaking is set to gain ground, the BF feedstock will necessarily be superior grades of ore with very low chemical impurities. Against all the demand positives stand the prospect of countries, including China encouraging steelmakers to focus on creating electric arc furnace (EAF) capacity where the feedstock is steel scrap instead of iron ore.
In fact, more and more BFs across the world is mixing steel scrap in varying degrees with iron ore for productivity improvement and restricting emissions. Whatever that is, David Cachot of Wood Mackenzie said: “The strategic importance of high grade iron ore in enabling lower-emission steelmaking is becoming increasingly clear… DRI and other emerging technologies remain highly sensitive to feedstock quality, reinforcing long-term demand for premium products (read premium ore).”
As for the impact Simandou will have on global trade in iron ore, Cachot says, the Guinean project comes with the potential to go “beyond volume. (The Simandou tonnes) will increasingly displace higher cost supply, reshape the cost curve and reinforce the market’s shift toward higher quality material. Marginal tonnes become increasingly vulnerable in a more quality sensitive market.” Give time, more premium ore from several other African centres will come to the market. As steel mills in the EU and China (nudged by the government) will be stepping up the use of very high grades of ore, the wave of new demand will allow suppliers of premium ingredient to charge higher premium over low and medium grades than available now. (IPA Service)
