Chinese investors eye struggling iron miners in Australia
Weak iron ore prices have been taking their toll in the industry, leaving smaller, high-cost producers struggling to survive, particularly in Australia.
But for some Chinese investors, the issue has become a key opportunity to secure cheap, ongoing supply of the steel making material, and they are approaching distressed Australian iron ore miners.
According to local dealmakers, the trend has grown more evident in the last two to three months, the Sydney Morning Herald reports.
“We are fielding an increased level of inquiry or interest in a number of mid-tier players,” Minter Ellison West Australian managing partner, Adam Handley, was quoted as saying. “I think there is an opportunistic element to the current activity we are seeing with prices so low and companies which have taken a significant hit to their market caps," he added.
The sustained weakness in iron ore prices has also affected China’s iron ore miners, forcing the nation to get supplies elsewhere. From January to April, Chinese imports of the steel-making ingredient from Australia were 195.845 million tonnes, or 63.7% of the total 307.282 million tonnes.
This is up from the 58.7% share of imports held by Australia for the whole of 2014. However, it appears that the pace of growth in market share is slowing, partly, because the Asian nation may be choosing to acquire assets instead of just their products.
"China is buying now more quality assets and secondly there is an increasing sophistication in the way they play these offers,” Paul Harris, managing director of advisory firm Record Point told SMH. "After CITIC's spend on Sino Iron I think they are especially keen to pick them up on the cheap."
Prices for the steel making material, Australia’s top source of foreign income, hit $46.70 a tonne in April, the lowest in a decade. The have picked up since then to around $63 this week.