In mid-November, the Guinean Port of Morebaya held the commissioning ceremony for the Simandou iron ore project, marking the mine’s official launch. Baowu Group reported that the $20 billion project integrates mining, rail, and port facilities. In mid-October, the first batches of ore were transported via the Trans-Guinea Railway to the country’s western coast and delivered to Morebaya, the dedicated export terminal for Simandou. By 2030, around 120 mln mt of iron ore is scheduled to be shipped from Simandou each year, mainly to China. Following the ceremony, a self-propelled barge loaded with 9,850 tonnes of ore sailed to a Newcastlemax waiting offshore, marking the very first transshipment via the floating unit Winning Simandou 1.
A New Variable in the Global Iron Ore Supply Landscape
As illustrated in the accompanying chart, Chinese seaborne iron ore imports have averaged around 1.19 billion tonnes over the past five years, with a record 1.24 billion tons imported in 2024. Australia remains the dominant supplier, exporting 784 mln mt to China in 2024, accounting for approximately 63% of total imports. Brazil follows as the second-largest source with 278 mln mt, representing about 22%.
Beneath this seemingly steady pattern, the global iron ore supply landscape is shifting. New supply from West Africa led by Simandou is set to reshape the market in the coming years. Located in southeastern Guinea, Simandou contains one of the world’s largest high-quality open-pit hematite deposits. According to the Joint Ore Reserves Committee (JORC), the mine holds 2.4 billion tonnes of controlled and inferred reserves and an estimated total resource of nearly 5 billion tonnes, with an exceptionally high Fe content of 66–67 %.
Annual production is expected to reach 120 mln mt within the next five years. Hindered by Guinea’s relatively underdeveloped infrastructure, market estimates shipment volumes of around 20 mln mt in 2026. If global seaborne iron ore trade grows steadily at 1% per year, by 2030, when Simandou reaches full production, it will account for 6.7% of global seaborne iron ore exports.
Change in Tonne-Mile Structure: Effectively "Creating a New Brazil Route"
From a shipping perspective, Guinea is more than iron ore. In recent years, Chinese companies have actively developed Guinea’s bauxite trade and driven a significant increase in its export volume. We expect Guinea’s exports on Capesizes to reach 160 mln mt this year. Guinea’s bauxite development is likely to plateau over the next couple of years, potentially stabilizing at 170–180 mln mt. With Simandou kicking in, Guinea effectively reshapes the ton-mile structure of the market, with 300 mln mt expected to be exported on Capesizes per year, creating what is essentially “another Brazil to China route”. In comparison, Brazil is estimated to export 380 mln mt every year via Capesize.
An even more significant factor is the ultra-long distance from Guinea to China. Even if Guinea’s export growth comes at the expense of ore exports from other countries, the seaborne market still sees a clear rise in tonne-mile demand. For instance, a 180,000 Dwt Capesize sailing from Morebaya to Qingdao via the Sunda and Taiwan Straits covers roughly 11,187 nautical miles. A round voyage requires about 108 days based on eco speed, including roughly 81 days at sea. This distance closely mirrors the traditional Route_C3 Tubarão to Qingdao. With 330–340 effective operating days per year, a Capesize dedicated to the Simandou–China trade could complete around 3.5 voyages, or around 600,000 tonnes per year. In comparison, the distance from Australia to China is only one-third of the distance from Guinea to China and a Standard cape dedicated to Australia-China runs can complete nine voyages per year.
Based on our assumption of 20 mln mt of exports next year, this would occupy approximately 35 Standard Capesize, or about 2% of the existing standard Capesize fleet capacity. Even so, when considering the broader trend of slower voyage speeds and port congestion in Guinea due to lack of experience and incomplete infrastructure, 35 vessels are more likely a theoretical lower boundary.
Based on this backdrop, the project is also creating a strategic expansion opportunity for Chinese shipowners. Notably, the Newcastlemax Winning Youth engaged in the first Simandou shipments belongs to Winning International Group, which owns a fleet of 56 vessels (53 Capesizes and 3 VLOCs). Through long-term time charter agreements, Winning now controls over 100 vessels, primarily hauling bauxite from West Africa. The group’s exports are expected to reach around 100 mln mt this year, including 80 mln mt from its equity mines. Furthermore, the Group has 10 VLOCs on order at Chinese shipyards with eight of these understood to be ordered specifically for Simandou and scheduled for delivery in 2026–2027. Indeed, Chinese owners have placed a significant amount of orders for VLOCs over recent years with these new units being used to service projects such as Simandou as China seeks to have more of its crucial dry bulk imports hauled by Chinese-controlled vessels.
Looking ahead, the commissioning of Simandou is likely to fundamentally support Capesize demand from 2026 onward. Moreover, any disruptions in loading operations in Guinea could lead to congestion, further bringing more uncertainties and volatilities into the shipping market.
Apart from Guinea, the four major miners, namely Vale, Rio Tinto, BHP and FMG, are also expanding capacity. On a purely price basis, the Simandou project could find it difficult to challenge the position of these low-cost iron ore producers, leading to steady increase of iron ore export volumes from Brazil and Australia. Regardless, these expansions will sustain the steady growth of overall seaborne iron ore hauled by Capesizes.
Meanwhile, the strong demand for Capesizes to ship iron ore and bauxite may push smaller vessels to carry coal that was previously carried by larger ships. This cascade effect has become especially evident against the backdrop of declining coal prices. In 2021, thermal coal prices once surged to 2,500 yuan/t (compared with today’s 830 yuan/t), prompting many miners to maximize coal sales via long-haul seaborne routes regardless of shipping cost. This year, coal shipments carried by Capesizes dropped sharply from 230 mln mt in the first ten months of 2024 to just 189 mln mt, an 18% decline. Among these, volumes from Colombia and the United States have fallen by 45% and 62%, respectively.
In summary, we estimate that next year’s tonne-mile demand for Capesize will rise by around 5.4%. Correspondingly, on the supply side, around 58 new Capesizes are scheduled for delivery by 2026, equivalent to about 3.3% of the current fleet, an increase that remains relatively moderate compared with the expected rise in the demand side.