Roughly half of China's iron ore mines may have shut down since prices dropped, opening the door for other low-cost producers to supply China with the key mineral for making building materials, an executive at global miner Rio Tinto (RIO.L: Quote)(RIO.AX: Quote) said on Monday.
We believe that perhaps up to half of domestic iron ore mines are currently shuttered, Anthony Loo, managing director for Rio Tinto, China, said at a China economic conference in Hong Kong on Monday.
Imports -- lower cost producers around the world -- have displaced domestic production, he said, speaking at the event, held by Australian investment bank Macquarie Group (MQG.AX: Quote).
China's increase in iron ore imports helps miners like Rio, which are used to competing heavily with domestic producers.
Many iron ore mines sprouted up in China when prices of the commodity soared. But falling prices have put cost pressure on the smaller, domestic producer.
Rio, the world's No. 2 iron ore miner, is fighting to get shareholders and Australian regulators to pass its controversial $19.5 billion deal with Chinese state-owned aluminium giant Chinalco, which was struck to help Rio handle its near $40 billion debt load.
Loo did not comment on the Chinalco deal.
Chinese steelmakers have been pushing for a 40 percent price cut in this year's talks with iron ore suppliers, as Chinese steel mills were not able to afford high ore prices due to their weak profits.
China imported a record 57 million tonnes of iron ore in April, an all-time high, up 9 percent from a month ago and 33 percent greater than last April.
The record imports will be seized on as leverage by both sides in annual benchmark iron ore price talks between China's top mill, Baosteel (600019.SS: Quote) and the top miners, BHP Billiton (BHP.AX: Quote)(BLT.L: Quote), Rio Tinto, and Vale (VALE5.SA: Quote).
(Edited by Michael Flaherty and Ben Tan)
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