Here’s an interesting tidbit from an article by Frik Els at Mining.com:
BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and thanks to their economies of scale have been flooding the market by concentrating on building market share rather than maximizing prices. This way the giants drive high-cost producers out of the business and crowd out any new players who want to enter the space.
And their dominance is only set to increase. BHP and Rio’s production plans for the Pilbara region of Australia alone is a staggering 750 million Mtpa while current number one Vale is planning to start work on its biggest project to date next year – the Serra Sul iron ore mine alone will add 90 million Mtpa to the Brazilian company’s current 310 million tonnes capacity.
What that seems to mean for the proposed Gogebic Taconite mine in northern Wisconsin is that there may not be much profit to be found in the mine.
Last year mining giant BHP Billiton unveiled plans to increase its iron ore production in the Pilbara region of Australia to 450 million tons per year, which would triple BHP Billiton’s iron ore production in that region.
BHP Billiton is one of the three largest mining companies in the world, all of which operate on economies of scale and all of which are drastically increasing their production over the next year. As production (and supply) increases, there certainly won’t be much room for the “little guys” like Gogebic Taconite to turn much of a profit.