Closure of Chinese Iron Ore Mines Benefits BHP Billiton and Rio Tinto

Jun 20, 2014 22:28

Source:SMM

Two of the major iron ore producers in world will benefit due to the closure of some rival Chinese iron ore mines upon falling prices.

Author: Paul Ploumis20 Jun 2014 Last updated at 06:09:14 GMT

CANBERRA (Scrap Monster): Two of the major iron ore producers in world will benefit due to the closure of some rival Chinese iron ore mines upon falling prices. The prices of iron ore has slumped to about 44 percent from the record level reported on February 2013. This price decline has affected 20 to 30 percent of mines in China and resulted in its closure, based on the reports by China Metallurgical Mining Enterprise Association.

The mine closure id helping the majors BHP, Rio Tinto as well as Vale, which already have two third of global seaborne supply from their low cost mines. China’s annual iron ore production rate is about $40 million and the country itself is the largest consumer of iron ore in the world.

Masterlink Securities Corp Analyst Sarah Wang said that many small Chinese mines have halted its production due to price fall and that is the right time for Rio and BHP to use the opportunity to increase their market share.

BHP, the world’s biggest mining company, last month also flagged the closure of some Chinese ore mines. Association’s general secretary, Liu Xiaoping said that after some time bigger ones in China would also be affected and about 70 percent of iron ore processing firms had closed as well.

Iron ore entered into a bear market in March and this week it reached a 21 month low of about $89 per dry ton, which is down from the peak level of $158.90 in February 2013. According to report of July 12, Morgan Stanley expects that the price level will again go down to $80 in the second half and will average up to $ 90 in 2015.

The world’ third biggest iron ore producer, BHP has lost about 8% of its market value from iron ore price peak of Feb 20, 2013 to the June 16 low. Rio’s market value has declined 16 percent while that of Vale, Brazil dropped about 27 percent.

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Closure of Chinese Iron Ore Mines Benefits BHP Billiton and Rio Tinto

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