The Conversation (0)
It’s no surprise that producers such as Rio Tinto (NYSE:RIO) BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE) seem to be deliberately continuing to expand their iron production in order to push down prices and drive smaller companies out of the iron market. Lawrence Williams of Mineweb likened the strategy to moves made by China in recent years, which have allowed the country to dominate the production of certain metals and resources.
It’s no surprise that producers such as Rio Tinto (NYSE:RIO) BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE) seem to be deliberately continuing to expand their iron production in order to push down prices and drive smaller companies out of the iron market. Lawrence Williams of Mineweb likened the strategy to moves made by China in recent years, which have allowed the country to dominate the production of certain metals and resources.
As quoted in the publication:
It’s uncertain whether this was a concerted policy by the big iron ore miners to re-exert their dominance of the sector. They certainly wouldn’t admit it if there was, but the net result (perhaps unintended consequences, although in this case beneficial to the big producers) is likely to be that when the Chinese and Western steel sectors do recover, which they inevitably will, the iron ore markets will be even more dominated by the big three producers and a few other major miners. Meanwhile some of the potential would-be competitor miners – particularly those with massive potential infrastructure costs for transport of ore and/or lower ore tenors requiring additional upgrading to generate an acceptable product – will just not be able to survive the lower price environment. Operations will close, perhaps never to reopen; finance will be cut off as the bankers consider the risk too great; and new projects just won’t get built.
