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The Three Major Iron Ore Giants are Frantically Expanding Production Capacity
International Energy Network News: Even as iron ore prices continue to fall, the three major mining giants continue to expand production capacity in an attempt to squeeze out smaller mining companies with higher costs. This approach is highly controversial. But Rio Tinto defended its strategy on Thursday."If we don't do this, others will," said Andrew Harding, head of Rio Tinto's iron ore division. "This is the cruel reality of competition in the international market."
Rio Tinto is the world's second largest iron ore producer. It has reached a production capacity of 290 million tons per year, and the company is still increasing investment. It hopes to reach 360 million tons on this basis, or 1 million tons per day. production goals.
Rio Tinto's competitors include BHP Billiton (BHP Billiton), Vale and other giants are frantically increasing production capacity. The former stated that it will increase production in mid-2017 from 225 million tons in the previous fiscal year to 290 million tons.
Since the beginning of this year, iron ore prices have been falling. As of the end of September, the price fell below US$80 per ton. Compared with the price level at the beginning of the year, the drop has exceeded 40%, which is the lowest level since 2009.
Although the fall in iron ore prices is affected by insufficient demand caused by China's economic slowdown, the main reason is that the surge in production led by Australia has caused the entire industry to fall into a serious oversupply, so that China's huge steel plants cannot absorb such a large amount of supply. scale output.
Large miners bucked the market trend and used low prices in an attempt to squeeze out other small mining companies. Rio Tinto CEO Sam Walsh said on the 9th of this month that 125 million tons of iron ore production capacity is expected to exit the market in 2014, of which about 85 million tons have been cut. The shutdowns are concentrated among secondary producers in countries such as Iran, South Africa and Indonesia, as well as some smaller operators in Australia.
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