The world’s major iron ore producers are depleting their reserve bases faster than some can replenish them, while the cost of replacing those reserves continues to rise, according to Wood Mackenzie.
A new market report from the UK consultancy finds that the world’s six largest iron ore producers collectively depleted 11.1 billion tonnes of marketable reserves between fiscal 2016 and 2025.
However, only three of the six replaced all the reserves they mined over the period.
Net reserve replacement ratios across the peer group ranged from 28–159%, reflecting differences in reserve conversion, capital allocation, and operational disruptions, Wood Mackenzie says.
Rising costs squeeze margins
One of the biggest challenges facing producers is rising costs.
According to Wood Mackenzie, C1 cash costs have increased sharply across the industry since 2016, roughly doubling for some producers.
Cash margins peaked across the industry in 2021 but have since been squeezed by cost inflation. By 2025, margins among the six producers had converged to approximately US$50–$60 ($70.3–$84.4) per tonne.
Wood Mackenzie says the narrowing buffer reduces producers’ ability to absorb further increases in input costs or prolonged periods of weaker iron ore prices without affecting investment decisions.
Declining ore quality is adding another challenge to reserve replacement.
The report finds reserve grades have fallen by as much as 1.6% among some producers since 2016.
Some producers have also shifted from achieving modest realised premiums to persistent discounts against the 62% iron benchmark over the past five years, driven by declining iron content and higher impurity levels.
Replacement becomes more expensive
The capital required to replace reserves has also emerged as a major differentiator between producers.
Wood Mackenzie’s analysis of cumulative growth capital expenditure per tonne of reserves added between 2016 and 2025 found costs ranging from approximately US$2 to US$10 a tonne.
The fivefold difference reflects variations in the quality of remaining resource pipelines, as well as the operational and regulatory challenges facing individual producers, the firm says.
As existing ore bodies mature, miners are increasingly having to invest not simply to expand production, but to replace tonnes already extracted.
“Many producers still have long reserve lives, with those carrying 15 or more years retaining a meaningful buffer,” Wood Mackenzie Director of Research for Metals and Mining Mihir Vora says.
“But the direction of travel is clear: as mine lives shorten, the margin for error narrows, and each successive tonne becomes more challenging and costly to replace.”
Wood Mackenzie Senior Research Analyst for Metals and Mining Mayank Maheshwari adds headline reserve replacement figures also do not necessarily capture changes in ore quality.
“Reserve replacement ratios tell only part of the story,” Maheshwari says.
“While several producers have successfully replenished depleted tonnes, the quality of those replacement resources is not always equivalent, with some operations experiencing grade erosion and rising impurity levels over time.”
Billions needed to maintain output
Several major producers have committed billions of dollars to brownfield expansions and sustaining projects over the coming decade as they seek to maintain production.
However, Wood Mackenzie characterises much of that spending as sustaining rather than growth investment.
The projects are largely designed to replace ageing and depleting ore bodies and maintain production at broadly existing levels, rather than deliver significant additional supply.
As a result, Wood Mackenzie says the iron ore industry is entering a period in which the capital, technical complexity, and effort required simply to keep production flat are materially greater than a decade ago.
Write to Jackson Chen at Mining.com.au
Main Image: BHP
