Mining Giants’ Push for Iron Ore Tests Mettle of Smaller Miners – by Rhiannon Hoyle (Wall Street Journal – July 22, 2015)

The four biggest iron-ore suppliers accounted for 71% of all iron-ore shipments in 2014, and they aren’t slowing down

SYDNEY—Big Mining is tightening its grip on the iron-ore market.

As industry giants such as Rio Tinto PLC and BHP Billiton Ltd. dig up ever more of the steelmaking ingredient for export, the resulting supply glut has caused prices to slump. But the majors’ tactics are helping them squeeze out smaller rivals, increasing their oligopoly’s share of global trade in the ore.

The world’s four biggest iron-ore suppliers—Rio and BHP along with Brazil’s Vale SA and Australia’s Fortescue Metals Group Ltd.—accounted for 71% of the world’s iron-ore shipments in 2014, up from an average of 65% from 2009-13, according to Citi estimates. The bank now reckons that market share for the four could rise to 80% by 2018.

There is no sign the majors are ready to pull back.

BHP said Wednesday its iron-ore output rose 14% to a record 233 million metric tons in its fiscal year through June, and forecast another 6% rise in the year ahead. Rio last week said it is sticking by plans to increase its output from the key Pilbara mining region of Western Australia to 360 million tons within the next couple of years, up from around 280 million in 2014. Vale meanwhile aims to produce 450 million tons of iron ore by 2018, up by more than a third from its output in 2014.

For the big guns, it is back to the future. Before the early 2000s, low prices and big investment costs meant the iron-ore industry was dominated by a small handful of large producers. From 1980 to 2005, iron-ore exports from Australia fetched an average $30 a ton in today’s dollars, BHP says.

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