Iron ore exporters from Australia are winning the battle for market share in China, boosting cargoes to the largest buyer and squeezing higher-cost producers as prices decline to the lowest level since 2009.
Shipments from Australia accounted for 59 percent of China’s overseas purchases last year from 51 percent in 2013, according to customs data on Friday. Brazil’s share was 18 percent from 19 percent in 2013, while exports from the rest of the world fell to 23 percent from 30 percent. The figures were based on calculations derived from monthly trade data by origin.
BHP Billiton, Rio Tinto and Fortescue Metals Group (FMG) increased low-cost output last year, betting that higher volumes would offset lower prices as less competitive rivals and Chinese mines were forced to close. The raw material retreated 47 percent in 2014 and Citigroup forecast further losses this year.
It makes sense for the majors to go on raising supplies as slumping oil prices help them cut costs further, preserving their margins, according to Credit Lyonnais Securities Asia (CLSA).
“Australia’s taken market share because they managed to build everything faster,” Ian Roper, a CLSA analyst in Singapore, said before the figures were released. “FMG has done spectacularly the last two years. BHP last year beat expectations. Rio always deliver on time.”
China imported about 548 million tons from Australia in 2014, an increase of 32 percent from a year earlier, after December imports climbed to 52.4 million tons, the highest on record for data going back to 2004. Shipments from Brazil were 171 million tons last year, 10 percent higher than 2013.
– Bloomberg