Small Aussie miners being pushed out amid iron ore slump

By Uwear

As our sister site Mining Global recently reported, China’s share of iron ore imports from premiere mining countries Australia and Brazil continues to rise despite the consistent fall of demand.

Numbers from General Administration of Customs reveal that China imported 453.1 million metric tonnes of iron ore during the first six month of 2015, with 83 per cent of it coming from either Australia or Brazil.

RELATED TOPIC: Weather conditions cause Rio Tinto to cut iron ore guidance for 2015

Chinese iron ore imports from Australia rose 14.8 per cent in the first five months of this year, while Aussies exports made up 63.9 per cent of China’s total imports during that time span.

China imported 74.9 million tonnes of iron ore in June, compared to 70.8 million tonnes in May. According to a recent report from Citigroup Inc., China’s ore imports are predicted to pick up even more in August.

But aside from its imports from Australia and Brazil, Chinese imports from other countries and territories fell by 38.16 million tonnes. Meanwhile, China’s steel exports rose by 27 per cent in the first six months of 2015 compared to the previous year.

RELATED TOPIC: Depressed coal prices won't hinder BHP Billiton

The slowing iron ore trade combined with a rise in exports of steel products indicates a lull in the Chinese steel industry, which is now dealing with overcapacity and a property slump. Recently, Rio Tinto said iron ore has declined to a “new-normal level” which may remain that way until 2020.

At this rate, iron ore miners won’t be able to continue coping with these losses, and will slowly begin reducing production.

Earlier this year, BHP Billiton announced its plans to slow down its plans of expansion by delaying its $630 million Port Hedland upgrade in Western Australia that would have increased output by 20 million tonnes.

RELATED TOPIC: Optimism In Iron Ore Slump: Vale SA Looking For Jump In Price Next Year

However, mining giants ValeRio TintoBHP Billiton and Fortescue Metals Group each reported increased output in its second-quarter results from April-June. BHP also remains committed to reaching its target of 290 million tonnes even without the upgrade, although it could come six to 12 months later than anticipated.

But the output of iron ore from smaller mining companies such as Atlas Iron are taking a steep fall.

The Platts IODEX CFR China price of iron ore was recently assessed at $56.75/Dry Metric Tons (dmt), which is up from a record low of $44.50/dmt earlier in July as the market finally stabilized. When the price dips below $50, it’s much more difficult for smaller mining companies to survive.

RELATED TOPIC: Can Atlas' operations at Mount Webber help iron ore market rebound?

After a small, yet steady incline in each of the past five years, the amount of iron ore exports by miners other than Rio, BHP and Fortescue has dipped this year to about 70 Mt. Meanwhile, exports from the three top companies have continued to increase every year, led by Rio Tinto Pilbara.

So while large mining companies in both Australia and Brazil continue exporting to China at a high rate, smaller miners are finding it harder and harder to keep pace.

Share

Featured Articles

Nine must-attend sustainability events for business leaders

From London to Abu Dhabi, Singapore to San Diego, these sustainability-focused events are designed to help business leaders action their ESG goals

Daniel Weise of BCG on new supply chain and procurement book

Daniel Weise, global leader of Boston Consulting Group’s procurement business line, on the timely publication of his new book, Profit From The Source

Attract and retain talent with flexible working and benefits

From office shut-downs and extra days off, to shorter weeks and work-from-anywhere policies, flexibility is the work perk must-have for summer – and beyond

Nurturing the next generation of women leaders in Africa

Leadership & Strategy

5 Mins With: Cybersecurity expert Ariel Parnes of Mitiga

Technology

People Moves: Pine Labs, Deutsche Bank, McKinsey, Fortinet

Leadership & Strategy