The start of operations at the Simandou mine opened a new era of long-distance iron ore flows
The emergence of long-haul Guinea-China iron ore trade will structurally support global Capesize demand, support freight rates on all major routes and create one of the strongest ton-mile expansions in recent dry bulk history. This will also help China reduce its dependence on Australia to a certain extent.
Simandou is one of the largest and highest-grade iron ore deposits (65% Fe content) in the world, located in southeastern Guinea. The first shipment of iron ore from the Simandou project was delivered in November 2025. The ore was transported from the SimFer mine via the newly built Trans-Guinean railway line to the port of Morebaya, one of the main export facilities built as part of the Simandou project, and loaded onto bulk carriers for shipment to China.
Simandou is divided into two zones: Blocks 1-2 are operated by the China-allied WCS consortium and have reserves of 1.8 billion tonnes, while Blocks 3-4 are led by the Rio Tinto-Chalco joint venture, which has reserves of 1.5 billion tonnes, with Guinea holding a 15% stake. Although Rio Tinto is the main partner in the southern block, the Chinese entities collectively have the greatest strategic influence across the project through ownership of the mine and joint control of the rail port infrastructure. China is the largest combined strategic stakeholder in the four blocs.
Shift in China’s iron ore import strategy
In Brazil, Vale supplies more than 80% of the country’s iron ore and has shipping agreements with COSCO and other Chinese companies. Therefore, a surge in iron ore imports from Guinea is unlikely to lead to a decline in iron ore trade on the Brazil-China route. Since China is involved in Guinean iron ore investments, most of Guinea’s iron ore is likely to be exported to China. Meanwhile, China’s political relations with Australia are tense, and it is likely that increased supplies of Guinean iron ore will encourage Chinese importers to shift from Australia to Guinea, increasing shipping demand.
Additionally, iron ore with high Fe content provides the high-grade input required for low-emission steel, making it essential for the global green steel transition.
DRI-EAF and hydrogen-based steelmaking require DR grade ore (67%+ Fe), but such ore is extremely rare, and only a small portion of the global seaborne market meets this threshold. Without high-grade ore, green hydrogen DRI cannot develop. The net-zero pathway (2050) requires a major shift from blast furnaces to DRI-EAF. Structural deficiencies in DR grade projects make high-grade deposits such as Simandou (65% Fe, close to DR grade) strategically important for green steel.
As trade routes grew longer, the Capesizes grew stronger
Assumption: A surge in imports from Guinea will lead to a decline in China’s iron ore imports from Australia.
The shift in iron ore trade flows from Australia-China to Guinea-China will increase the utilization of Capesizes. When Simandou reaches its annual export target of 120 million tonnes, most likely by 2030, the Guinea-China route will require almost 180 Capesize vessels compared to the 64 vessels needed to transport the same volume from Australia due to the much shorter sailing distance. The Guinea-China round trip takes more than 90 days, almost three times as long as the Australia-China rotation which takes 30-35 days.
As a result, each Capesize operating on this route completes fewer voyages per year, increasing demand for vessels for the same trade volume. This shift in trade will result in additional net demand of 116 Capesize vessels, representing one of the largest anticipated ton-mile expansions in the dry bulk sector in this decade.
Although Australia-China freight rates are only a third of those between Guinea-China, making Guinean ore appear more expensive, China will likely still prioritize procurement from Guinea. This is because Guinea will supply high-grade iron ore with low levels of impurities (65% Fe), a similar advantage that Brazil has, compared to Australian iron ore which is predominantly 59–61% Fe, thus requiring more blending to meet the required quality standards.
As a result, Brazil and Guinea’s shipping cost structures will be generally comparable, and when Simandou reaches full-scale production, its cost curve is expected to be similar to Brazil’s (if not lower). Moreover, China’s aim to diversify away from Australian supplies, combined with massive investment in Guinea’s rail and port infrastructure, makes economic and strategic sense.
This will increase charter rates on key routes and not just on West Africa-China, as fewer ships are available for flexible deployment. Overall, the Simandou development will create a structurally stronger Capesize freight market, with strong revenues across global routes in the years to come.
Source: Drewry
