"Are we Approaching the End of the Iron Ore Age? Unveiling the Collapse of a Vital Resource"

The iron ore market is rapidly declining, with prices plummeting and projections indicating further drops through 2024. From a peak of $116.75 per ton in July 2023, iron ore prices have fallen to around $90 per ton by September, and industry experts predict a potential further dip to $85 per ton before the year is out. However, amidst this iron ore downfall, ferrous scrap is gaining ground as the preferred raw material for steel production, driven by sustainability efforts and cost efficiency.

1. Oversupply of Iron Ore: A Market Glut

Global iron ore production surged to 2.5 billion metric tons in 2023, primarily fueled by major suppliers like Australia, Brazil, and India. This oversupply, combined with a sharp downturn in demand from China’s steel sector, has placed significant downward pressure on prices.

The fall in iron ore demand comes as China’s construction and real estate sectors—critical to steel consumption—are experiencing serious slowdowns. Major property developers like Evergrande and Country Garden have halted or postponed projects, shrinking the need for steel and pushing prices down across global markets.

2. China’s Steel Demand Declines While Scrap Steel Rises

China, which consumes more than 60% of the world's iron ore, saw steel production drop by 5.7% in 2023, and further reductions are expected. Faced with environmental regulations and economic struggles, China is looking to cleaner, more efficient ways to produce steel, further reducing the demand for iron ore.

In this environment, scrap is becoming increasingly important. Electric Arc Furnaces (EAFs), which primarily use scrap instead of iron ore, are now a critical part of China’s and the world’s efforts to decarbonize the steel industry. EAFs emit 75% less carbon dioxide than traditional blast furnaces and are more adaptable to modern, lower-carbon economies.

3. Global Scrap Steel Market: Turkiye’s Role as a Major Consumer

The global scrap steel market is expanding as countries transition to more sustainable production methods. Nations like the United States, Germany, and Japan are among the largest producers of scrap. However, Turkiye stands out as one of the largest consumers of scrap, relying on imports to fuel its steel production.

Turkiye’s steel industry is heavily dependent on Electric Arc Furnaces (EAFs), with over 70% of its steel production based on scrap inputs. This reliance on scrap has positioned Turkiye as a major player in the global scrap steel market, importing vast amounts from leading producers in Europe and the United States. Turkiye’s demand for scrap steel is expected to grow as it continues to expand its EAF capacity.

4. Scrap Steel Availability and Price Implications

While the use of scrap steel is on the rise, global availability may soon face constraints. The supply of scrap steel is dependent on the rate of old steel disposal and recycling, which can lag behind increasing demand. In 2023, scrap steel prices rose by 20% in several markets due to high demand and limited availability, and this trend is expected to continue as more countries embrace green steel production.

This rise in scrap steel prices could narrow the cost advantage that iron ore currently holds. However, as the world pushes toward sustainable development goals and carbon reduction, scrap steel is poised to become an increasingly critical resource, offering a more environmentally friendly and, in many cases, cost-effective alternative to traditional iron ore.

5. Price Outlook: A Grim Future for Iron Ore

With the global shift toward scrap and Electric Arc Furnace technology, the demand for iron ore is likely to continue falling. Some projections suggest that global iron ore demand could shrink by as much as 200 million tons annually by 2030 as more nations adopt EAFs.

Currently priced around $90 per ton, iron ore could continue its downward trajectory, potentially falling to $85 per ton by the end of 2024. In contrast, the demand for scrap steel will likely drive prices higher, especially as supply constraints tighten globally. This shift could lead to a new equilibrium in which scrap takes precedence over iron ore, fundamentally altering the structure of the global metals market.

Conclusion: A New Era for Global Steel Production

As the steel industry pivots toward more sustainable and environmentally friendly practices, the dominance of iron ore is eroding. The rise of scrap and Electric Arc Furnaces is reshaping the future of steel production, offering a cleaner and increasingly cost-competitive alternative to traditional blast furnace processes. While the global scrap steel market expands, countries like Turkiye continue to lead the charge in scrap-based production, changing the dynamics of the metal trade.

For iron ore miners and exporters, the outlook is grim. The days of high prices and surging demand may be over as the world moves toward a greener future. In this new landscape, scrap could emerge as the metal of choice, leaving iron ore in the dust.