Falling Prices Could Benefit Vale, BHP, Rio Tinto

Bloomberg reported yesterday that major miners such as Rio Tinto (NYSE:RIO) BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE) could counter-intuitively stand to gain as iron ore prices fall. Bloomberg cites the China Metallurgical Mining Enterprise Association as saying that 20 to 30 percent of mines in that country have closed following a 44 percent drop in the price of iron ore since February, making it a good time for the miners to move in for a greater market share.

As quoted in the publication:

The closures are helping Rio Tinto and BHP which, along with Vale SA (VALE5), already control about two thirds of global seaborne supply from their low-cost mines. About $40 billion a year of iron ore is mined in China, the country that’s also the world’s biggest buyer of the steelmaking component.

Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp., told Bloomberg:

Many smaller mines in China have stopped production due to the falling prices. It’s the right time for BHP and Rio to seize the opportunity to boost their market share.

Click here to read the full Bloomberg article.