GLOBAL IRON ORE AND STEEL MARKETS Iron ore is the primary raw material used in the production of steel and — combined with steel — constitutes the world’s second largest commodity bloc by value, after crude oil. At least 800 million tonnes of iron ore are produced annually, whilst production of finished steel probably accounts for about 1.1 billion tonnes of production a year, emphasizing the scale of these closely-linked markets. IRON ORE SPECIFICATIONS AND TYPES Iron ore is categorised by dint of where it is produced and priced, and by its ferrous content, expressed as a percentage. The largest producing countries are Australia, Brazil, India, South Africa and China. Major consuming countries include China — with approximately 60% of global steel production in 2009/10 — Japan and Korea, as well as most developed and developing countries. The 62% ferrous content grade has attracted liquidity in swaps, but a large spectrum of iron ore fines are produced and mined from as low as 30% for some of the lower-quality Chinese material to above 60% at the high end. The most merchantable grades lie between 58% and 65%, with key markers at 58%, 62%, 63.5% and 65%. There is a degree of correlation between prices in the 58% to 65% range, but the most linear pricing and consuming relationships lies between 60% and 63.5% ferrous content. A simple way to look at iron ore is that it starts as fines (heavy grains, like sand), is turned into pig iron, which in combination with coking (metallurgical) coal, and energy can then produce crude (liquid) steel, which is finished (rolled) into either in long (e.g. Rebar) or flat (Hot Rolled Coil) form. Steel comes in many hundreds of specifications depending upon the requirements for the finished product. It is an alloy, or a combination of metals whereas iron ore is a mineral.