SYDNEY – As Rio Tinto and BHP Billiton ship more iron ore than ever to China, the Australia mining giants face a fightback from Brazil’s Vale for market share that threatens to drive already weak prices even lower.
Rio Tinto and BHP, which will release quarterly production data this week and next, have been racing to keep up exports to boost profits while lower prices eat into margins.
They now face stiffer competition from Vale, which is also working its mines harder, after the world’s biggest producer won approval for its giant Valemax ships to unload in China, cutting down on freight costs.
With a capacity of 400,000 tonnes each, the 34 Valemaxes are the world’s biggest bulk carriers and twice the size of vessels used by Rio and BHP, but a ban on entering Chinese ports had severely curbed the cost efficiencies of the larger ships.
“BHP and Rio have been looking to raise volumes in this environment to maximize every tonne,” said Morgans Financial analyst James Wilson.
“With Vale’s new ships plying the waters and the price where it is, it will be full-steam ahead over the next quarter, with more ore than ever coming out.”
Until recently, Rio and BHP have focused on displacing Chinese iron ore miners to capture market share as tumbling costs forced many of them to shut.
In the first five months of the year, Chinese imports of the steel-making ingredient from Australia were 242 million tonnes or 63.9 percent of total imports, up from the 58.7 percent market share Australia held in all of 2014.
Brazil has actually surrendered market share in recent years, with Chinese imports of 71 million tonnes in the first five months, or 18.7 percent of the total. This is level with 2014 but down from 22 percent in 2012.
But since late last year, Vale has been rebuilding its ties with China.
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