This document discusses the development of iron ore mining in West and Central Africa and its potential impact on global iron ore prices. It analyzes the issue from various perspectives including different countries, mining companies, and uncertainty factors. Several suggestions are provided to strengthen the analysis, such as incorporating supply and demand curves, accounting for demand and production uncertainties, considering strategic interactions between companies, and quantifying potential efficiency gains. Adding more quantitative economic modeling and scenario analysis is recommended to improve the study.

1. West
and
Central
African
iron
ore
development
and
its
impact
on
world
prices
Author
Luke
Hurst
Discussant
Omer
Majeed

2. Strengths
• A
very
relevant
issue
for
China,
Australia,
Africa
and
other
Asian
economies.
• In
depth
case
study.
• Looks
at
a
lot
of
relevant
variables.
Different
players,
different
scenarios
and
individual
country
capaciDes.
• Enjoyed
reading
it.

3. SuggesDons/comments
Supply
and
Demand
Curve
• Price
and
Supply
analysis
should
incorporate
supply
and
demand
curve
analysis.
• Look
at
how
elasDc
demand
and
supply
curves
are.
• How
much
would
Africa
add
to
world
supply?
• How
much
would
that
shiI
the
world
supply
curve
by?

4. SuggesDons/comments
Uncertainty
maKers.
• Uncertainty
maKers.
• You
need
to
take
into
account
of
uncertainty.

5. SuggesDons/comments
• China’s
demand.
Slowing
of
growth
and
concerns
of
a
housing
bubble
in
China
may
mean
that
the
demand
of
steel
and
consequently
iron
ore
declines.
• How
would
that
impact
worlds
demand
curve
quanDtaDvely?
• How
would
that
impact
the
NPV
of
these
investment
mines
projects
in
Africa
and
elsewhere?

6. SuggesDons/comments
• “BREE’s
(2012)
forecast
indicates
that
iron
ore
exports
to
China
will
conDnue
to
grow
at
around
2.8
per
cent
per
annum
between
2012
and
2017
(a
total
increase
of
around
141mt
over
the
period)
(see
Table2
below).”
• Point
forecasts
can
be
quite
risky.
• Especially,
when
you
don’t
take
into
account
model
uncertainty.

7. SuggesDons/comments
• Northern
Territory
forecasts
of
commodity
were
prone
to
major
fluctuaDons
(demand,
supply,
discoveries,
exchange
rate
fluctuaDons
data
problems).
• Frances
Creek
mine
exports
to
China.
• ABARES
revisions.
• I
think
they
had
to
substanDally
revise
a
lot
their
forecasts
when
I
was
there.

8. SuggesDons/comments
• Individual
economies
and
circumstances.
Need
to
incorporate
• Australia/Northern
Territory.
Labour
costs
going
because
of
other
major
mining
developments.
• INPEX,
Northern
Territory.
• Gorgon,
Wester
Australia.
• Compete
for
labour
force.

9. SuggesDons/comments
• Given
all
this,
there
is
a
lot
of
model
uncertainty.
• Should
be
explicit
about
model
uncertainty.
• Can
use
scenarios
for
demand
(as
was
done
for
Supply)
• Can
use
LOP,
BMA.
• Clark-­‐McCracken
(CM,
JAE,
2008).
Ensemble
improves
forecast.

10. SuggesDons/comments
Strategic
Games
• Good
analysis
on
countries,
but
what
about
companies?
• Rio
Tinto,
BHP,
etc?
They
operate
in
Australia,
as
well
as
Africa.
• They
want
to
maximize
profits
(NPV
of
returns).
Don’t
want
prices
to
plunge.
• China
an
aberraDon.
A
big
aberraDon.
But
once
they
own
an
asset.
They
have
a
trade
off
trying
to
maximize
NPV
return
from
that
asset,
or
providing
a
cheap
rate
for
companies
back
home.
• OligopolisDc
compeDDon.
• Game
theory.
Collusion?
Compete?
How
would
that
change
the
analysis.

11. SuggesDons/comments
Companies
being
pushed
out
• Good
analysis.
• What
about
technology?
Does
that
maKer
about
which
companies
stay
and
which
don’t?

12. SuggesDons/comments
Efficiency
gains
• China
and
India
will
not
be
able
to
cost
compete
with
other
economies.
• Efficiency
gains.
As
they
move
more
towards
their
comparaDve
advantage.
This
efficiency
gain
should
maKer.
• It
is
not
about
how
many
mines
you
have,
rather
how
much
growth
in
welfare
(
GDP
per
capita,
employment
growth
and
cost
of
living
pressures)
maKer.
• It
should
be
noted
that
resulDng
efficiency
gains
can
be
big.

13. Conclusion.
• A
good
case
study.
• Relevant
topic
to
Asia,
Africa
and
Australia.
• Will
benefit
from
a
bit
more
in
depth
quanDtaDve
economic
analysis.