Author: Paul Ploumis
25 Aug 2014 Last updated at 05:32:37 GMT
LONDON (Scrap Monster): Mackenzie also stated that, the import price will not rise above 100 dollars per ton, and he also added that, the production will be increased up to 290 million tones per year, which may cost about, 3.5 billion dollars.
According to Morgan Stanely, an American multinational financial service corporation, the reason behind the unchanging price of iron ore; which is 92 dollars per ton, is BHP Billton. Analysts also add that, it is clear that the steel output and iron ore demand will decline. They state that, the sudden reason behind the unexpected expansion proposed by the BHP Billton group is to decline import price and destroy the Chinese producers.
The reason behind the fall in iron ore prices is more likely to be the increase in output by BHP Billton, Rio Tinto and Vale; the trio powers, rather than the decline in demand, by the Chinese.
Chinese iron ore demand is slowly declining from last year's 9% to 5% this year. The gains of Chinese producers and mines have declined. The estimations made by the research house, Gavecal Dragonomics stated that, the average production cost for Chinese miners is 125 dollar per tonne, where as the current import price is 91.90 dollars per tonne.
The Chinese miners now temporarily shut down the production, due to the rise of production cost much above from the import cost. Both the Chinese miners and the Trio powers are dealing the decline in import price by increasing the production rather than decreasing it; in short, they are at war.
According to Mitchel Komesaroff, the Chinese producers are not shutting down because, they are aware about the fact that, if they shut down now, then they are permanently out of business. He also added that, the Chinese miners are struggling to keep up with the production a bit more longer.
The Chinese producers are begging the local governments to help them out, but the local governments being as broke as the miners, is not of much help. Most of the mines are privatized and they don't have enough funds modernize their techniques.
But the case is entirely different with BHP Billton, Vales and Rio Tinto, as these three powers are strong and efficient, being the low cost iron ore miners and apart from that these companies are also earning money in the present market condition.
The trio powers know that with the increase in production, they can easily turn away the Chinese producers as well as small term Australian producers along with them.