Iron Ore: Canada to Be a Top 5 Producer by 2020


Iron Ore Stocks…  Is the bottom in?

Iron ore has been a major growth theme over the past 5 years with global production doubling in the first decade of the millennium.  China has been a main driver behind demand for iron ore with global steel production increasing from 55Mt per year to 600Mt per year from 2001 to 2010.  China accounts for nearly ~45% of global steel production.  Iron ore is a commodity that will continue to see strength as steel is the main building block needed to build skyscrapers, bridges, roads and the necessary infrastructure that ties it all together.  Over the next 5 years, another 300Mt of capacity will be added to steel blast furnaces around the globe, with most of this capacity coming from China. 



While last year’s sell off has been extra hard for some materials companies with many gold stocks trading close to 2009 lows, iron ore companies remain resilient trading well above 2009 lows.  Adrianna Resources ADI-V $1.06 is 5 times the
.20 share price it was trading at in March of 2009.  Labrador Iron Mines LIM.TO $5.00has lost nearly a 1/3 of its value since April of 2011, and is still trading 5 times 2009 lows of $1.  Iron ore prices remain elevated approaching $150/t after correcting briefly in October to around $120/t which is still two to three times 2009 lows of $50/t.   This is all due to very tight supply constraints for iron ore which is forecasted to be in a production deficit well into 2015.
 

One thing for certain is that iron ore stocks have been in a correction for 12 months along with most other materials stocks.  They look like a very attractive group to buy on a relative value basis as the industry’s growth prospects and continuing supply deficits for at least the next three years make investing conditions favorable.  Iron ore is the foundation building material for 5B people around the world trying to live a “developed world lifestyle” where governments see a solution to poverty problems by urbanizing their populations en masse.  With these types of conditions driving growth over the first half of the century, iron ore is the one commodity other than graphite whose growth prospects far outweigh the current mines in production.

Iron Ore Seen Rallying as China Lending Policy May Boost Demand - Businessweek

Global Iron Ore Demand is expected to double in 15 years
 
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