We estimate the average total cash cost of Chinese iron ore mines is US$66/dmt in 2015, US$5/dmt lower than our H1 2015 estimate. The downgrade in costs is because of weaker-than-expected demand in the non-contestable market leading to additional closures of high cost mines. The private closures and state-owned enterprise (SOE) production cuts have totalled 17 million tonnes in the non-contestable market.
Existing mines also continue to cut costs to survive. One measure we are now seeing is mines increasing mass recovery by mining higher Fe grade raw ore - essentially high grading the deposits - and lowering concentrate Fe grades to recover more concentrates with the same input of raw ore. We estimate the cost saving from mass recovery increase is US$3/dmt. We've also observed almost all SOE mines continue to cut wages.
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Insight | Dec 2015
China iron ore cost curve H2 2015
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