Africa, regarded as the next iron-ore frontier, is only likely to boost global supply from 2020 and only if countries overcome infrastructure and political hurdles, analysts and producers said this week.
The market for iron-ore, used in stainless steel production, is the second biggest commodity trading market in the world, valued at some $150-billion, said Phillip Killicoat, iron-ore manager at Credit Suisse commodities.
Of that, Africa accounts for only about 2%, although it holds some 20% of the world's resources, he said.
"Africa has enormous potential, never mind the fact that the iron industry itself is growing at a rate even faster than global GDP, driven primarily by East Asia," Killicoat told an African iron-ore conference in Cape Town.
Steel demand, spurred by China's economic growth, has recovered more than anticipated in 2010, with future growth expected to be powered by emerging markets to 2015 and beyond.
Africa, the world's poorest continent where many countries still rely on their minerals as a key foreign currency earner, hopes to cash in on this forecast amid good prices for iron ore.
"China is expected to increasingly turn to Africa to satisfy its iron ore needs ... (as) more Chinese companies look to invest or partner in mines," Yaoyun Xin, managing director at independent metals consultancy SMM Information and Technology told Reuters.
MAJOR PRODUCERS IN AFRICA
Top global iron miners, including Rio Tinto, Vale and ArcelorMittal, have projects either in production or at an exploration stage in Africa, with three major iron ore-bearing regions identified in the west, central and southern parts of the continent.
At the moment, Australia and Brazil are the two top global producers of the material, with South Africa being the only African country recognised as a major exporter, accounting for about 80 percent of the continent's total output.
"African projects are only expected to contribute less than 5% of the projected 47% growth in global iron ore demand by 2020," said Ian Cope, global exploration manager for iron and coal at ArcelorMittal, the world's largest steelmaker.
"The potential is there but there are challenges and it's not a given that this ore will get out of Africa."
Among the challenges are inadequate rail and ports to move the ore, regulatory uncertainty as well as environmental concerns and a lack of a skilled workforce.
Cope said most of the iron ore in Africa was of a lower grade, although top grade hematite deposits were found in South Africa, the Democratic Republic of Congo and Guinea, where the promising Simandou deposit was in the process of being mined.
"By 2025 we see it is possible that Africa can supply 200 million tonnes per annum of additional iron ore into the iron ore market," said Ernst Venter, a manager at Exxaro.
He said the forecast excludes current expansion plans for the Sishen mine owned by Kumba Iron Ore, the world's 10th largest producer and the biggest in Africa.