UPDATE 2-Iron ore slump set to shrink China’s mining capacity – by David Stanway (Reuters U.S. – March 27, 2015)


SHIJIAZHUANG, China, March 27 (Reuters) – A slide in iron ore prices is turning the screw on China’s fragmented mining sector, paving the way for closures and consolidation with three-quarters of the country’s mining capacity operating at a loss, industry officials said on Friday.

More mine closures in China, the biggest consumer of the steelmaking commodity, would increase its appetite for imported iron ore and help ease a global glut that has slashed prices by more than half in the past 12 months.

“I would like to thank the big four miners for driving prices down because it has given bigger domestic mines an opportunity and forced small miners to cut production,” Gao Yan, deputy general manager at the mining unit of Chinese steelmaker Angang Group, told an industry conference.

Top global producers Vale, Rio Tinto and BHP Billiton have boosted output despite falling prices, prompting No. 4 iron ore miner Fortescue Metals Group to propose limiting production. The commodity fell to $54.20 a tonne .IO62-CNI=SI this week, the lowest since records began in 2008, and Citigroup predicted prices will drop below $50.

Three-quarters of China’s domestic iron ore capacity is incurring losses and capacity utilisation rates at small iron ore mines dropped to as low as 20 percent at the end of last year, said Yang Jiasheng, chairman of the Metallurgical Mines Association of China (MMAC).

“If there are some small loss-making iron ore producers that are forced to close then this will be a good thing for the market,” he said, adding that bigger producers would also have to restructure and cut costs.

Only about 3 percent of China’s 4,037 iron ore mines are large scale, with the rest mostly small, said Yang.

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