China iron ore cost summary
Our 2021 average total cash cost of Chinese iron ore mines is US$15/tonne higher compared to 2020 due to higher energy costs, strong RMB and higher royalties and levies because of higher iron ore prices in 2021. We expect costs to increase to around US$82/tonne due to higher diesel prices in 2022. Iron ore prices were stronger than expected in H1 2021 and dropped fast in H2 2021, but the average price was above US$150/tonne and bought positive margins to most producers. With lower iron ore prices and higher costs, we expect that margins of domestic miners will fall in 2022. We anticipate weaker iron ore prices from 2023 onward, which will impact Chinese margins and lead to closures of domestic mine capacity over the medium term. In this report, we review China's iron ore costs, margins, infrastructure, quality, and reserves and outline some of the changes we see happening.