Iron ore miners in
China, the biggest consumer of the steelmaking commodity, keep digging away
even though about 75% of them are losing money, in an attempt to retain market
share.
The situation,
however, can’t continue for much longer said industry officials Friday according toReuters. If anything, they added, is paving the way for
closures and mergers.
"I would like to
thank the big four miners for driving prices down because it has given bigger
domestic mines an opportunity and forced small miners to cut production,"
Gao Yan, deputy general manager at the mining unit of Chinese steelmaker Angang
Group, was quoted as saying.
About 1,500 iron ore
mines in China would be forced to close this year, eliminating 20% to 30% of
national capacity.
According to market
estimates about 1,500 iron ore mines in China would be forced to close this
year, eliminating 20% to 30% of national capacity.
The problem for
Chinese producers, which feed 35% of the local demand, is that their ore is
lower grade than the foreign imports. At the same time, their production costs
are at the upper end of the big three.
Prices in the pits
But while small and
private iron ore miners may choose to sell or at least halt production, state-owned operations are locked into contracts with mills.
That may force them to keep going, adding to the global glut that has almost
halved prices in the past year.
Iron ore prices fell
again Friday to $53.14 a tonne, the lowest since records began in 2008
According to MBIO
Index, seaborne iron ore prices fell again Friday to $53.14 a tonne, the lowest
since records began in 2008, and market predictions anticipate
they are likely to drop below $50 before the end of the year.
Rio Tinto (ASX:RIO),
BHP Billiton (ASX:BHP), and Vale (NYSE:VALE), the world’s top iron ore
producers, continue to increase output, despite calls by other producers, such as Fortescue
Metals Group (ASX:FMG) to band together to cap output.
And while "the big three" are still making money,
questions remain about the viability of their heavily indebted rivals Fortescue
and Gina Rinehart’s Roy Hill project.
Source-Mining.com