Home / Metals / Push to flood iron ore market crushes smaller suppliers
Stainless Steel Flanges

Push to flood iron ore market crushes smaller suppliers

* Iron ore majors accelerating expansion projects
* Strategy to boost output winning market share
* Higher-cost, less competitive suppliers in trouble
* By 2015 top producers to account for over 80 pct of world iron ore trade
A faster-than-expected increase in iron ore production by the world’s biggest miners in Australia and Brazil this year is pushing less efficient smaller suppliers of the steel-making raw material to the edge.
From Europe to Australia to the Middle East, smaller miners in the once-lucrative iron ore business are cutting output or shutting altogether despite rising demand, while a few mega miners are taking a bigger share of the $130 billion seaborne iron ore market.
Big miners such as Vale , Rio Tinto and BHP Billiton are flooding the world with hundreds of millions of tonnes of cheaply mined ore, driving down prices by almost a third this year.
The price fall is squeezing higher-cost producers, while the big miners are feeling less pain due to ever-lower costs of production from economies of scale and increased sales. Barriers to entry are also increasing, shutting out all but those with access to the biggest ore deposits.
“Iron ore is fast becoming a big boys game, with little room for the small or marginal producer,” says Gavin Wendt of Australian consultancy MineLife.
By 2015, major producers in Brazil and Australia will account for 1.15 billion tonnes or 83 percent of world seaborne ore trade, according to Australian government data, up from 71 percent just three years earlier.
Ken Brinsden, managing director of Australia’s 12-million-tonns-per-year Atlas Iron says
“unprecedented” iron ore output from the majors could strip away up to 85 million tonnes of iron ore annually from suppliers in China and elsewhere.
At today’s prices, around 200 million tonnes of Chinese domestic production alone is unprofitable, James Wilson, a mining analyst with Morgans Stockbrokers estimates.
“The likes of BHP and Rio Tinto are just too competitive to take on in this market,” says Wilson.
Macquarie Bank research shows use of domestic ore by Chinese steel mills fell to 241 million tonnes in the first quarter of 2014, down 40 million tonnes the fourth quarter of last year.
That’s not surprising, given only a third of China’s domestic mines have direct links with the mills, leaving the majority to compete in the price-driven marketplace.
The big miners, meanwhile, are beating forecasts as they churn out more ore. BHP expects to produce 245 million tonnes this year, up 9 percent on last year and well ahead of expectations. 
Rio Tinto is also boosting output 9 percent to 290 million tonnes this year, which analysts say could set the stage for a drive to its next goal of 360 million tonnes. 
Vale is aiming for 312 million tonnes and produced a record amount in the second quarter to June 30. [ID:nL2N0PZ0XX]
Chinese customs data shows a significant drop in imports from countries that are smaller in the seaborne iron ore market even though total exports are still rising.
“Higher cost producers are being displaced by lower costs producers like Australia and Brazil,” Vale said in response to questions by Reuters. “This is already happening and will increase over time.”
Exports from Iran – the world’s eighth-biggest supplier on the seaborne market – fell by a third in June from a year ago to just 1.2 million tonnes, according to Iranian industry data.
In Sweden, Northland Resources , whose long-term strategy was to develop its Kaunisvaara mine in Sweden to reach a yearly production rate of 4 million tonnes of iron ore concentrate, has been forced into a company-wide reorganisation.
Commissioning of a second processing line to produce a high-quality iron ore concentrate was placed on hold this month.
In Australia, the 1.7 million-tonnes-per-year Cairn Hill mine, started in 2010 when iron ore fetched twice today’s price, was shut after costs of $104 a tonne overran selling prices.
Around Australia other small miners once hoping to make inroads into the seaborne-traded market but now struggling include Pluton Resources , Sherwin Iron Ltd and Noble Group’s Frances Creek mine.
Kimberley Metals Group, an exporter of more than 150,000 tonnes a month to China, is cutting production by 25 percent at its Ridges mine in response to plunging ore prices.
Similarly, in Canada Labrador Iron Mines Holdings has come to a halt, warning it otherwise faced further losses.

($1 = 1.0741 Canadian Dollars)

Source: Reuters


About www.nctv.net

www.yaang.com provide a wide range of steel products as Steel pipe, Steel pipes and seamless pipes, Alloy pipes, Pipe fittings, Composite steel pipe used in the industry, construction etc.

Leave a Reply

Your email address will not be published. Required fields are marked *


Scroll To Top