Iron ore is an important commodity currently in high demand, due to population and infrastructure growth in developing countries, especially Nigeria.
The underdeveloped mining of iron ore in Nigeria has led the nation to import the mineral which can be produced locally. This development is expected to lead to an increase in the price of the commodity, as the nation relies solely on imported iron ore.
Why is the increase imminent
A surge in steel consumption is certain, as the world emerges from its pandemic-induced slump. This is set to drive iron ore to an unprecedented high as the biggest miners struggle to keep up with the frenzied pace of demand.
An Estate Surveyor and Developer, Tunji Lawal, told Nairametrics that expectations are that benchmark prices can get to $200 a ton – topping the record $194 hit more than a decade ago.
According to him, this is happening as Chinese steel producers ramp up production in defiance of government attempts to rein in output to control the industry’s carbon emissions.
He said, “That’s tightening an iron ore market that hadn’t fully recovered from a supply shock more than two years ago.
Iron ore prices could go higher in the short-term and exceeding $200 a ton is definitely possible and that will also push the price up in Nigeria. The price here, which is about N325,000/ton (8mm), is bound to go northward and may increase by N100,000 within a month.”
He added that the increasing demand had been boosting steel prices from Asia to North America.
The hike is not limited to steel, as other building materials are also expected to rise further.
READ MORE: Why Ajaokuta Cannot Make Steel
Meanwhile, Dangote Cement, which increased from N2,600 to N3,800 barely a month ago, stands at N4,000/bag and still counting. The price may rise over N4,000 depending on market forces.
Lafarge Cement and BUA Cement also increased from N2,400 and N2,250 to N3,600 and N3,250 respectively, within the same period. Their prices may also rise further.
Tunde Oluwole, a fellow of the Nigerian Institute of Builders, explained that the development was caused by high-interest rates, inflation, increasing exchange rate and scarcity of forex in the country.
He said, “The increasing prices in Nigeria is a result of the combined effects of high-interest rates, devaluation of the naira, inflation, and non-effective distribution network of the materials.”
What you should know
The mining of minerals in Nigeria accounts for only 0.3% of its gross domestic product, due to the nation’s overdependence on its vast oil resources.
China accumulated a majority of the global iron ore imports in 2019, with a 69.1% share of total global imports. Japan followed behind distantly with a 7.5% share of iron ore imports.