Mining

South Africa to resume iron ore mining in a major boost to global supplies

Fears of a global iron ore shortage have been somewhat allayed with South African mining given the green light to resume operations from June 1.

The African nation shut down mining operations from March, easing some of the restrictions in April to allow for limited operations at some sites.

Now, all mining operations can resume at 100 per cent as their government moves to Level 3 easing of COVID-19 restrictions – which also means South Africans can enjoy a beer for the first time since restrictions were put in place in March.

It comes following the total shutdown of operations at the AngloGold Ashanti gold mine where 164 workers tested positive to COVID-19.

The mine, regarded as the deepest gold mine in the world, had resumed operations following the nationwide shutdown but was only operating at 50 per cent capacity.

Following the detection of the first case, operations were ceased and testing began which unearthed the mass confirmed cases of COVID-19.

 

What the revival of South African mining means

The spread of COVID-19 across the globe put severe limitations on the volume of iron ore that could be produced and exported.

South Africa and Brazil are large producers of iron ore, along with countries including China, India and the United States of America which have all been impacted by COVID-19 and reduced mining operations.

American management consulting company McKinsey & Company predicted that reduced operations in Brazil and South Africa could equate to a five per cent fall in global iron ore production.

Australian mining companies have been picking up the slack with 42.3 million tonnes shipped to China in the March quarter alone – a 10 per cent increase.

BHP also announced plans to increase its iron ore export capacity in Port Hedland, Western Australia by 14 per cent to help meet the rising demand.

The return of South African mining will help ease any global iron ore shortages, but other global challenges mean shortages could continue.

 

How decisions in China and Brazil will shape the global iron ore market

Brazil accounts for 13 per cent of all global iron ore production but that country faces a COVID-19 crisis in the coming months.

Unlike countries like South Africa and Australia, Brazil did not enforce widespread shutdowns or lockdown restrictions and is now paying the price.

Iron ore production has declined by 12 per cent and that could be set to increase as Brazil moves to fourth place globally in terms of confirmed COVID-19 cases.

South Africa’s return to mining production will certainly help ease this shortage but there is another major factor at play – China’s threat to boycott Australian iron ore.

China purchases an estimated 70 per cent of global iron ore and 62 per cent of that comes from Australia.

But China has threatened a trade war with Australia following calls from our Prime Minister Scott Morrison for an investigation into the origins and cause of COVID-19 – which infamously started at a wet market in the Chinese province of Wuhan.

But the suggestion that China could move towards importing iron ore from Australia’s chief rival Brazil now appears unlikely given the reduced production in the South American nation because of weather, safety concerns and now COVID-19.

Fortescue Metals chief executive Elizabeth Gaines said that China’s demand for Australian iron ore had actually increased and was likely to continue to increase in the coming months as Brazil’s production goes down.



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