Billions hacked off mining majors after BHP's China comments
Mining's top companies were all marked down significantly on Tuesday after BHP Billiton said that China's steel growth rates "will flatten, and they have flattened."
"The big infrastructure build clearly will come to some end," Ian Ashby, the Australia-based company's chief of iron ore, told reporters today in Perth according to Bloomberg.
China's ferocious demand for iron ore has been a central feature of the global mining industry over the past decade and the driving force behind the spectacular profit growth at mining's big three.
BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and even though the price of iron ore has come down by more than a fifth from record highs of $180/tonne touched in September last year, it's still a very profitable commodity.
Benchmark iron ore import prices at China's Tianjin port was last quoted at $144/tonne by Steel Index, a level it has spent most of 2012 at, recovering from a $116/tonne low set in November.
Ashby did temper his comments by saying that he thought prices will hold up over the medium term and that only in 2025 will it "soften markedly."
Word from the world's number one miner, nevertheless gave an excuse to investors to take chunks out of the majors and by midday in New York, BHP Billiton's ADRs were down 3.7%.
Valuations of Rio Tinto and Brazil's Vale, both of which are more exposed to iron ore than BHP, were also slashed with Rio losing 3.7% and Vale shedding an even 3%. Combined, the globe's biggest listed mining companies are worth some $330 billion.
$52 billion Anglo-American was hammered down 4% by lunchtime in New York, while Swiss-based met coal giant Xstrata curbed losses to 2.3% on the LSE.
Canada's Teck Resources gave up 3% in Toronto, Fortescue's ADRs bled 2.7% and further down the scale losses were even more pronounced with $23 billion Kumba Iron Ore's ADRs giving up 3.9% and US number one coal producer Peabody losing 5.7%.
China dominates the global trade in just about every commodity including iron ore (representing almost half of world trade), copper (38%), coal (47%), nickel (36%), lead (44%) and zinc (41%).
Earlier this month China forecast that it will grow by 7.5% this year. China recorded GDP growth of 9.2% in 2011 and annual growth has averaged 10.4% since 2001, peaking in 2007 at 13%. The last time expected growth was pegged at below 8% was 2004.