Material Insights · Understanding the Material World

Iron ore and Steel

Iron ore exists almost only to make steel: a blast furnace tonne needs about 1.4 tonnes of ore, scrap-based arc furnaces need very little, and India both feeds its own mills and exports low-grade fines mostly to China.

Iron ore (commodity) and Steel (commodity): 4 relationships.

How they are linked

1. Main raw material

Physical flow · Strong · Iron ore to steel (blast furnace route)

Blast furnaces smelt iron ore with coke into pig iron, which oxygen furnaces turn into steel, so ore demand rises and falls with blast furnace output.

  • about 1,400 kg iron ore per tonne of crude steel, blast furnace route
  • about 800 kg coal per tonne, same route
  • 98% share of US usable iron ore shipped to steelmaking, 2025

These are typical route figures; ore grade and pellet use shift them. Direct reduced iron plants also use ore, so ore demand is wider than blast furnaces alone.

Sources: World Steel Association; USGS

2. Scrap route

Substitution · Rising · Scrap replaces ore in arc furnaces

Arc furnaces melt mostly scrap, so each tonne of steel made from scrap avoids the ore a blast furnace would need.

  • about 880 kg scrap per tonne of crude steel, EAF route
  • over 1,400 kg iron ore saved per tonne of scrap recycled

The more steel is made from scrap, the less ore each tonne needs, which is why ore demand can fall even while steel output holds. Scrap supply is limited by how much old steel reaches the end of its life, so ore stays essential in fast-growing economies.

Sources: World Steel Association

3. Price link: main use

Cost and price · Moderate · Both ways

Chinese mill output and margins set seaborne ore demand, but the site's steel index is for the US, where mills mostly melt scrap, so the measured link is loose.

  • 0.07 monthly change correlation
  • 0.32 12-month change correlation
  • 0.50 fitted elasticity

Ore tends to lead the US steel series by about two months. Global ore averaged about $99 a tonne in the first nine months of 2025, down from $112 in the same period of 2024, as weaker Chinese steel demand was only partly offset by growth in India, Vietnam and others.

Sources: Material Insights (World Bank, FRED, IMF data); USGS

4. India's ore export policy

Policy · High in India · Export duties keep ore for domestic mills

India is a large ore producer and a growing steelmaker, so government balances miners' export income against securing cheap ore for domestic steel.

  • 50% export duty on low-grade iron ore lumps, May to November 2022
  • 47.8 Mt India iron ore exports, FY24, over 90% to China
  • about 310 Mt India usable ore output, 2025 estimate

The 2022 duty, 45% on pellets, cut exports sharply until it was withdrawn in November that year. India mainly exports low-grade fines, with pellets about 24% of shipments in FY24, so beneficiation and pelletising capacity at home decide how much of this ore domestic mills can use.

Sources: USGS; IEA Policies Database; India Sea Trade News

For investors

Key learnings

  1. Iron ore demand is a blast furnace story: Chinese steel output sets the seaborne price, and any shift to scrap-based steel cuts ore per tonne.
  2. The measured price link to US steel is weak because US mills use scrap; Chinese steel margins are the better guide for ore.
  3. India's export policy can switch quickly, as the 2022 duties showed, so Indian ore exporters carry policy as well as price risk.

What to track

  • Seaborne iron ore price (62% Fe CFR China): Main cost signal for blast furnace mills and ore exporters (Daily · SGX futures, Platts or Argus)
  • China crude steel output: Sets most of seaborne ore demand (Monthly · National Bureau of Statistics of China and worldsteel)
  • India iron ore exports by grade: Domestic surplus and export policy pressure (Monthly · Ministry of Commerce and BigMint)

For policymakers

Key learnings

  1. India's steel capacity plans rest on domestic ore, so ore policy (auctions, duties, beneficiation) is steel policy.
  2. Export duties protect domestic supply but cut miners' export income; they worked as a short-term tool in 2022.
  3. Growing scrap use would lower future ore needs, so scrap collection policy affects long-term ore balances.

What to track

  • Domestic iron ore output and stocks at mines: Whether supply keeps pace with steel capacity (Monthly · Indian Bureau of Mines)
  • Iron ore export volumes and duty settings: Balance between export earnings and domestic supply (Monthly · Ministry of Commerce)

India

India produced about 310 Mt of usable ore in 2025, feeds most of it to domestic mills, and exports mainly low-grade fines, over 90% of them to China in FY24.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Fact sheet: Raw materials, World Steel Association (2018)
  3. Mineral Commodity Summaries 2026: Iron ore, USGS (2026)
  4. 2022 Export duty withdrawal (iron ore and pellets), IEA Policies Database (2022)
  5. India's iron ore exports at a three-year high at 47.8 MT (BigMint data), India Sea Trade News (2024)