Baosteel(SH:600019) Minmetals Securities·2025-11-19 05:44Investment Rating - The report assigns an investment rating of "Positive" for the steel industry, indicating an expectation of overall returns exceeding the benchmark index by more than 10% [4]. Core Insights - The Simandou iron ore project in Guinea, which has the largest and highest-grade undeveloped iron ore reserves globally, officially commenced production on November 11, 2025. Chinese enterprises hold over 50% of the equity resources in the project [2][11]. - The initial combined production capacity of the Simandou project is expected to reach 120 million tons per year, with production ramping up from 2026 and expected to reach full capacity around 2030. This project is strategically significant for China to reduce its reliance on Australian and Brazilian iron ore imports [2][16]. - The Simandou project is anticipated to contribute 5% to global iron ore supply upon reaching full production, equivalent to 10% of China's iron ore imports in 2024 [16]. Summary by Sections Project Overview - The Simandou iron ore project is located in southeastern Guinea and features significant reserves of over 4.4 billion tons with an average iron content exceeding 65% [11][12]. - The project is divided into northern and southern blocks, with major Chinese companies like China Baowu and Chalco leading the northern block's development [12][15]. Market Impact - The project is expected to shift the global iron ore supply-demand balance from a tight equilibrium to a more relaxed state, leading to a gradual decline in iron ore prices. The average all-in sustaining cost (AISC) for Simandou is projected to be in the 75th percentile globally, which will pressure higher-cost marginal mines [3][22][23]. - The anticipated increase in supply from Simandou, along with expansions from other major mines, is expected to create downward pressure on iron ore prices, which have been fluctuating around $100 per dry ton [22][23]. Strategic Significance - The Simandou project exemplifies a successful model for Chinese enterprises to secure strategic resources abroad through collaborative efforts, enhancing China's bargaining power in the global iron ore market [24][25]. - The project is part of a broader strategy to diversify China's iron ore import sources and reduce dependency on the four major mining companies that dominate the market [16][20].