Mitsui : Iron ore: A proud past. A promising future

Australia's lifting of a ban on iron ore exports in 1960 was the trigger for Mitsui's entry into the iron ore business. The company moved fast, acquiring stakes in the Mount Newman joint venture in 1967 and the Robe River joint venture in 1970. In both projects, in addition to developing the mines themselves, it was necessary to build extensive infrastructure including railways, ports and worker townships. Both Robe River and Mount Newman are located in the Pilbara region in the north part of Western Australia. The Pilbara region currently accounts for around half of the total seaborne trade in iron ore. Mitsui had a presence there from the very earliest years.

Japan's iron and steel industry grew by leaps and bounds in the postwar years. Over two decades, crude steel production roughly doubled every five years, rising from 9 million metric tons in 1955 to 22 million in 1960; 41 million in 1965; 93 million in 1970; and 119 million in 1973. This epic expansion was driven by the construction of modern steel plants with huge blast furnaces in coastal locations.

Japan's approach stood in contrast to that of Europe and the United States, the pioneers of the iron and steel industry. In the West, it was traditional for steel works to be located in close proximity to the mines from which the iron ore and the coking coal for the furnaces came. The postwar Japanese iron and steel industry prospered by developing an innovative model based on importing both commodities from abroad. Australia's iron ore industry used its long-term contracts with Japanese customers as collateral to invest in a massive expansion of supply with minimum risk. Both sides enjoyed significant growth. Mitsui was instrumental both in developing the mines in Australia and in importing the iron ore to Japan.

Although the Japanese iron and steel industry played a formative role in establishing the new postwar supply structure, it began to suffer from over-capacity and falling production in the 1980s and 1990s. Crude steel production even dropped through the 100-million-metric-ton level in six years out of those twenty. Rationalization could not be avoided.

Since the iron ore mines in Australia had been developed principally to serve Japanese customers, the mining industry there suffered when iron ore prices and volumes fell. The situation was exacerbated by the oil shocks in 1973 and 1979, and from the mid-1970s to the mid-1980s American capital withdrew from iron ore mining. From the late 1980s to the early 2000s, a wave of consolidation took place, with bigger miners buying up smaller operators with less financial heft. The upshot was that the three "mining majors" - Vale of Brazil and the Anglo-Australian companies Rio Tinto and BHP Billiton - controlled around 70% of the seaborne trade by the dawn of the new century.

Another change of equal significance taking place at the same time was the extraordinary rise in China's iron ore imports. The resulting global supply squeeze led to a surge in prices. Global capital (including Chinese capital) pushed for the development of new mines and a host of new companies entered the iron ore production space. The advent of these newcomers meant that the mining majors' share of seaborne production slipped to about 60% by 2013, despite their having ramped up production.

Mitsui actively expanded its iron ore mining interests even as the postwar supply model built around the primacy of Japan's steel industry was changing. In 1990, the company invested in the Yandi and Mt. Goldsworthy joint ventures in the Pilbara, Australia. Mitsui also increased its original 1973 investment in Minerações Brasileiras Reunidas (MBR) during Brazil's politically difficult "lost decade" of the 1980s. Through a series of changes of ownership, Mitsui ended up with a 15% stake and seats on the board of Valepar, the controlling shareholder of Vale, in 2003.

Mitsui's partners in the Pilbara are the Anglo-Australian mining majors BHP Billiton and Rio Tinto. We are participating in four joint ventures with BHP Billiton: Mount Newman, Yandi, Goldsworthy and Jimblebar. Our relationship with Rio Tinto is built around the Robe River joint venture, where we are currently expanding the West Angelas mine.

Iron and steel play a crucial role in driving the growth of national economies (hence the old Japanese saying that "iron makes the nation"). Demand for a reliable, long-term supply of iron ore is sure to be as important in the future as it was in the past.

When Mitsui went into the iron ore business in the 1960s, we went in very much for the long term. This long-term commitment helped us overcome difficult times and respond flexibly to the evolving environment as our partners changed and our mining assets were reshuffled. Currently, Mitsui produces over 35 million tons per year with BHP Billiton and Rio Tinto in Australia, and around 15 million with Vale in Brazil. Our recent investment in the expansion of the West Angelas mine and our acquisition of a stake in the Jimblebar mine signal our resolve to continue providing the world with a steady supply of iron ore in future. In line with our corporate mission, we take care to develop our iron ore assets and the related infrastructure with respect for local communities and the physical environment. Mitsui is proud to be contributing to the economies of the host nations and to global economic growth.

The posted information is as of the date of issuance. The information may change without notification.