World`s three largest iron ore producers compete for Chinese market
Source: www.chinamining.org Citation: People`s Daily Online Date: July 21, 2014
Just a few years ago, the world`s three biggest iron ore producers threatened to cut the supply of iron ore to China with the intention to rising prices. But with a market swing from sellers to buyers, they now have to find every way to compete for the Chinese market and lower the costs.
Brazil`s mining giant Vale has launched a series of publicity campaigns to woo Chinese customers. Like its Australian counterpart, it has also begun to offer discounts on shipments to China. Prior to this, Anglo-Australian mining company Rio Tinto and Australian Fortescue Metals Group had increased their discounts on low-grade iron ore.
As well as reducing prices and stepping up public relations activities, the world`s three largest iron ore producers have been forced to cut costs in a search for competitive advantage.
According to ABC reports, due to the sharp decline in iron ore prices, the world`s largest mining company BHP Billiton may lay off up to 3,000 employees in Australia. These are not the company`s first job cuts: 500 employees have been cut in recent months including 100 at its headquarters Perth.
Market power is undergoing a rapid swing from sellers to buyers and competition between iron ores is intensifying, insiders said.
It is understood that due to the increase in global supply and slowing demand growth in China, this year Platts 62 percent iron ore index dropped from 134.50 US dollars per ton at the beginning of the year to 95.28, a decline of more than 30 percent.
The latest statistics from the China Iron and Steel Industry Association show that at the end of June, China`s iron ore price index (CIOPI) stood at 326.85 points, down 7.32 points from the previous month. The domestic iron ore price index was 286.14 points, down 20.12 points, while the imported iron ore price index was 345.28 points, down 1.52 points.
As a downstream industry, the steel sector`s market situation is not favorable. From January to May, 26 of the nation`s 88 key large and medium steel mills suffered losses amounting to 8.9 billion yuan. In addition, with the gradual tightening of bank lending the steel industry is finding increasing difficulty in obtaining long-term loans, and the risk that capital strands might break has increased.
"Because of this mills have adjusted their strategy, and their purchases have become very cautious."
Iron ore prices will continue to fall, perhaps to below 80 U.S. dollars, said Xu Xiangchun, consulting director of maysteel.com. From the current situation, the global supply of iron ore will further increase. At the same time, the market situation of the worlds` largest consumer, China, continues to deteriorate. For the three iron ore producers, the Chinese market has become their only resort and competition will become more intense.
The article is edited and translated from: People.cn, author: Yang Ye
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