Small miners feel pinch from rush to boost iron ore output
High-cost iron ore producers suffer as pricesfall amid massive production by the big boys
A faster-than-expected increase in iron ore production by the world's biggest miners in Australia and Brazil this year is pushing less efficient, smaller suppliers of the steel-making raw material to the edge.
From Europe to Australia to the Middle East, smaller miners in the once-lucrative iron ore business are cutting output or shutting altogether despite rising demand, while a few mega miners are taking a bigger share of the US$130 billion seaborne iron ore market.
Big miners such as Vale, Rio Tinto and BHP Billiton are flooding the world with hundreds of millions of tonnes of cheaply mined ore, driving down prices by almost a third this year.
The price fall is squeezing higher-cost producers, while the big miners are feeling less pain due to ever-lower costs of production from economies of scale and increased sales. Barriers to entry are also increasing, shutting out all but those with access to the biggest ore deposits.
"Iron ore is fast becoming a big boys' game, with little room for the small or marginal producer," said Gavin Wendt of Australian consultancy MineLife.
Iron ore is fast becoming a big boys’ game, with little room for small producers
By next year, major producers in Brazil and Australia will account for 1.15 billion tonnes or 83 per cent of world seaborne ore trade, according to Australian government data, up from 71 per cent in 2012.